Should the Democrats oppose Trump's tariffs with a return to the ideology of free trade (albeit with handouts for globalism's losers)? That's the view of Edward Alden, writing this week in Foreign Policy. Alden launches a defense of prior Democratic administrations' support for NAFTA and TPP, where for instance presidential hopefuls Bernie Sanders and Elizabeth Warren have been sharply critical.

Alden's conceit is that in the case of both NAFTA and TPP prior Republican administrations had set the agenda, and the incoming Democrats in the White House had no choice other than to accept that agenda or walk away from trade deals altogether. Alden writes: "For Democrats, the choice for decades has been a Republican trade policy or no trade policy. A truly Democratic trade agenda would have produced deals quite different from NAFTA or the TPP." In other words, a bad trade deal is better no no deal.

Alden's principle is: "Trade is good, period." Never mind rising inequality, sweat shops and slave labor, carbon leakage, essential drugs priced beyond most people in the world; forget about the resource curse states, displacement of indigenous peoples, devastation of forests and decimation of endangered species. To be sure, not all simply a product of free trade. But all undeniably connected to Davos-driven globalization in which free trade is a central creed.

Alden's notion of how the US and its allies won the Cold War (through multilateral economic cooperation, the WTO etc.) is fanciful.The Cold War was over before the WTO even took shape let alone came into existence;the years leading up to the defeat of Sovietism were marked by more tension among allies than cooperation over trade (agriculture, for example) . More fundamentally, our situation is different than that of the Cold War. Today, in a sense, all security is cyber security. Our most ruthless economic competitor China is also our ascendant geopolitical rival. Despite the dreams of some of its leaders the Soviet Union never managed to come close to challenging the West's economic success.

Today national security requires the retaking of economic sovereignty. That doesn't mean tearing apart the WTO because most of the WTO's agreements have safeguards and exceptions provisions that-when properly interpreted-allow for economic sovereignty (whether public morals or security or conservation of exhaustible resources).

Retaking economic sovereignty does require real skepticism about new trade deals driven by corporate interests and free trade ideologues rather than by the national interest or the needs of people. Democrats should adopt the exact opposite maxim from that of Alden-better no trade deal than a bad deal. Arguably, Sanders and Warren have already done that. And it doesn't exclude good trade deals, if we could ever get one.

But Alden's revisionist history about Clinton and Obama is more fiction than fact. Much more truthful is that the Clinton Administration simply dropped the ball on NAFTA. Joseph Stiglitz, who present at the time, recalls there was not even a discussion about the investment chapter of NAFTA (Ch. 11), which allows corporations to sue investors and recover 10s or 100s of millions of dollars, often because governments have changed regulation against investors' interests-for perfectly legitimate reasons. The Clinton administration did negotiate side deals on labor and environment-it's just that they had no teeth. As for TPP, President Obama was hardly a reluctant convert-he was an enthusiastic backer of the pact-claiming, without any evidence, that it would somehow help the US with China (an argument that Harvard Law professor Mark Wu demolishes in forthcoming scholarship). Obama's trade officials were not under duress moving forward with a GOP trade agenda that they didn't own; Michael Froman, Wendy Cutler and others were hard-core neoliberals, arguably with fewer hesitations than the Republican mainstream in negotiating trade deals on behalf of Google,Apple and Hollywood (rather than American workers or indeed the people of the world). And that isn't even to mention Larry Summers.

Democrats today shouldn't hitch their future to this discredited corporate globalism. Instead, Democrats should embrace the new economic sovereignty as the only sensible response to America's geopolitical conflict with China-and, equally importantly, as an opportunity for rebuilding public institutions that are needed as much for the country's future security as its prosperity. Tariffs may not be the best or most important way to retake economic sovereignty-in fairness to Trump, they were probably among the few instruments easily available that could be deployed (within certain constraints) by the executive alone. Adopting a robust response to China and a larger role for the state in ensuring that the economy works for everyone (including for not against our security) doesn't mean being uncritical about the way in which losers and winners are created by the tariffs; we have a duty to question the fairness of the way the pain is distributed. Just as there are losers from free trade, there are also losers in a transition where we retake economic sovereignty. Free trade advocates prove nothing therefore when they point out that there are costs or losses from imposing tariffs. The question is dividing them equitably through taxes subsidies and other measures. Trump should be given real credit for the tariffs already helping direct supply chains away from China, thus lowering US dependency on our geopolitical rival. But Trump's inattention so far to vulnerable groups and individuals, to the collateral damage from tariff policies, must be called out.

Democrats should always remember who gets their hands on the controls when free trade is the mantra; Stiglitz is one of the sharpest minds I know and yet the free trade technocrats were able to slip a lot by him in NAFTA as he freely admitted. Free trade talks bring with them big corporate interests who are, at the same time, prepared to resist liberalization tooth and nail when it harms vested interests. If, in the real world, free trade worked in favor of progressive values and goals, it would not be green industrial policies that are challenged or disciplined at the World Trade Organization, but fossil fuel subsidies (the latter of course are backed by the kind of anti-environmental big corporate interests behind Joe Biden's presidential bid).

Democrats may be perturbed that the retaking of economic sovereignty has been linked on the right to insular nationalist or nativist agendas. The challenge for progressives is to decouple these notions, proposing an alternative conception of national economic sovereignty where America wins through empowering people. As Representative Ro Khanna, Bernie Sanders campaign co-chair, has set out, this means large-scale public investments in education, infrastructure, non-proprietary research. China's rise has been facilitated through a shrewd and highly selective imitation of our system. Whether it's the Green New Deal or cyber security, we'll never win by turning back to neoliberal trade talks; instead we need to relearn the exercise of collective economic sovereignty through a strong progressive state-pursuing prosperity and security but also justice.

This is from testimony by Beth Baltzan at a House Ways and Means Committee hearing yesterday on "Enforcement in the New NAFTA":

The Ultimate Check on Bad Behavior: The Sunset Clause

The history of U.S. trade policy exposes particular challenges with Europe and Japan, who have had a penchant for agreeing to tariff concessions and then using non-tariff means to undermine those concessions. It was one of the motivations for Congress to authorize USTR to negotiate non-tariff barriers in 1974. At least in the run-up to the Uruguay Round, Europe and Japan were viewed as considering GATT rules to be aspirational norms, rather than binding obligations. That does not seem to have changed for the Europeans, at least, as they, of the WTO Members who have lost more than 10 disputes, have the lowest dispute settlement compliance rate, at less than 40%.

In an effort to foreclose these types of dodges, the U.S. response has been to make trade agreements ever-more prescriptive, with increasing constraints on government flexibility, with binding dispute settlement. However, this kind of constraint on government flexibility is precisely why there are more and more complaints that these agreements are, effectively, vehicles for deregulation. It was one of the reasons the Obama Administration’s negotiations with the Europeans became bogged down. The Europeans were concerned about rules that would compromise their food safety regime, and the Americans were worried about rules that would compromise our post-financial crisis regime.

These prescriptive rules do not stop sovereign entities – particularly ones not subject to the same transparency strictures as those in the United States – from blocking imports. Even with binding dispute settlement. Sovereign entities will do what sovereign entities want to do. For this reason, the assumption that the tariff elimination provisions in TPP would automatically mean more access for U.S. exports is inconsistent with the U.S. experience over the past 70 years. As former USTR Sue Schwab pointed out,

I worked with Robert S. Strauss, who was the United States trade representative in the Carter administration at the time and my first mentor. He took me to Capitol Hill when he met with Congressional delegations. We were trying to get beef into the Japanese market, and I’m still trying to do that 30 years later.

Having these agreements be permanent only encourages that kind of behavior. Binding dispute settlement does not address the issue because the actions are taken either within the letter of the agreement, or through non-transparent means that make it impossible to meet the burden of proof.

If, on the other hand, our trading partners were aware that the agreement would not automatically be renewed, but instead would be subject to an affirmative decision by each of the parties, the incentive to comply with the terms of the agreement would be heightened.

Businesses claim they need certainty. Certainty for what? To recoup their investments. This was an intrinsic part of the discussion of the renewal of the African Growth and Opportunity Act in 2015. Democrats wanted a 15-year term, and Senate Republicans wanted a 5-year term. House Republicans, who wanted to see increased investment in Africa, were focused on the amount of time business would need to recoup that investment. The extension was ultimately granted for 10 years.

The Committee Report had this to say about the period of extension:

As part of its oversight function, the Committee has conducted a thorough process of reviewing AGOA legislation and consulting with interested stakeholders about the possibility of extending and renewing AGOA. This process includes congressional hearings, participation in AGOA Forum meetings by Committee Members and staff, informal consultations with interested stakeholders including the African diplomatic corps and senior African officials, as well as studies from the International Trade Commission and the General Accountability Office. All of these efforts have informed the Committee’s development of this legislation and confirmed the need to extend AGOA for another ten years.

There is no reason bilateral or regional agreements should be treated differently.

Beyond encouraging compliance, these sunset clauses also force us to reconsider provisions that seemed appropriate at the time but are eventually obsolete, or even damaging. At one point, we believed prohibitions on capital controls were appropriately included in our trade agreements; then the financial crisis happened, and countries like Iceland found that capital controls were a necessary lifeline. Sometimes certainty means we are certainly wrong.

Her three main points seem to be about: the sunset clause as an enforcement tool; the sunset clause as a way to provide flexibility in terms of regulatory policy space; and the sunset clause as a way to evaluate how trade agreements are working.

First, in terms of the effectiveness of enforcement through dispute settlement, it may not work in every case, but it does work in a lot of them, even when the discrimination is on a de facto basis. Would a sunset clause create a greater incentive to comply? Anything is possible, but it's a little hard to imagine that it would play out this way. I do see how the threat of withdrawal gets you a few concessions on a one time basis, but after that I would think your trading partners would start to ignore you.

As for flexibility, I'm not sure how shifting from dispute settlement to threats of leaving the agreement as a way to achieve compliance leads to more regulatory policy space. Assuming it is effective (which I'm not sure it would be, but just for the sake of argument), I think it would lead to less policy space.

And finally, with regard to reevaluating trade agreements, I do think that reconsidering the content of trade agreement is a good idea. However, a sunset clause that kicks in after a few years and requires a decision whether to stay in or get out seems like a terrible way to do it. What we need instead are permanent committees that meet once or twice every year to talk about issues as they arise.

In addition to all of these points, the specific sunset clause in USMCA transfers power over trade agreements from Congress to the president in a way that should cause some concern.

Summing up, I'm pretty skeptical that a sunset clause in trade agreements is a good idea. More on all this from Inu and me here.

The Trump Administration's strategy against China suffers many flaws, the most serious of which is the failure to use judicial procedures in the WTO. As my recent study https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3390659 explains, the Trump Administration his lodged only three WTO cases against China, when assuming the various allegations to be true, dozens of cases should have been lodged.

In talks in legal and business circles, I have often heard the excuse that cases against China cannot be easily brought and prosecuted because companies are not willing to go on the record to make claims against alleged Chinese practices such as "forced" technology transfer. Time after time, I have heard that companies won't publicly disclose specific acts of abuse by Chinese officials out of a fear of formal and informal Chinese governmental retaliation.

This argument ignores the relaxed rules of evidence before WTO panels and the panel's broad power to seek information outlined in DSU Article 13.

Had the United States brought WTO legal cases against China, evidence of an improper Chinese government role could have been presented in the form of anonymized questionnaire data to US (and non-US) companies suffering from abusive practices by the Chinese government or related entities. The US government could also have presented reports from independent experts who themselves spoke with private sector victims.

Then in a judicial proceeding, the panel would have been able to seek whatever information it needed to verify or refute the US prima facie case. As DSU Article 13 explains, the panel would have been able "to seek information and technical advice from any individual or body which it deems appropriate." This could have included the Chinese government as well as market participants and independent experts pursuant to DSU Article 13.2. As DSU Article 13.1 notes, the panel would have been enable to establish procedures to identify and prevent disclosure of any information given to the panel confidentially.

As I noted in a recent piece in the Wall Street Journal, the Trump Administration has shown little interest in putting law at the centerpiece of its China strategy https://www.wsj.com/articles/u-s-china-talks-ignore-global-trade-rules-11558123934.

With no interest in law as the central means of regulating anti-competitive governmental behavior, Trump's USTR has shown no evidence of even thinking about how to solve the alleged factfinding problems that the business community routinely points to as an explanation for why it may be difficult to bring and win legal cases against China at the WTO.

My study (now posted on SSRN) of the Trump Administration's strategy on US-China economic relations shows how the Administration has missed the opportunity to more clearly define what China is doing wrong and to articulate the norms that may be needed to regulate state capitalism or state socialism.

The White House and congressional Democrats have opened talks to resolve outstanding details that have thus far held up the new North American trade deal, according to people briefed on discussions between House Speaker Nancy Pelosi and trade chief Robert Lighthizer.

Pelosi told Lighthizer that she will designate members of her caucus to be working group representatives to deal with labor, enforcement, environment and pharmaceutical provisions of the deal, two people briefed on the discussions said. ...

On enforcement, I would prefer reopening the text and fixing all the various DS chapter flaws that could prevent panelists from being appointed. But if everyone is looking for a quick fix that avoids reopening the text, one possible solution is for the parties to establish the roster now. That would at least fix the particular problem that NAFTA DS struggled with, although the text is vague enough that new problems may arise.

Has it struck you that, so far, WTO Members and most dispute settlement commentators keep their focus almost exclusively on the WTO Appellate Body (AB)? Be it criticizing or defending the AB, trying to save or reform it, or thinking of possible alternatives for “appellate review” (such as Article 25 arbitration).

Though more WTO panels are pending than ever before, panels have, surprisingly, been spared from (even US) criticism. Little attention is paid also to what will happen with panels and panel reports as of 11 December 2019, when (as most predict) the Appellate Body has only one member and (again, quite likely) no alternative for appellate review is hammered out (i.e., "under the status quo") …

Firstly, WTO dispute panels will still be automatically established and composed, and publicly circulate their final reports. Again, not even the United States has, to date, signaled that it wants to end WTO dispute settlement altogether; their critique is focused solely on the Appellate Body (AB), not panels.

Secondly, the question remains, however, whether, without an AB, panel reports will continue to be automatically adopted by the DSB, following the negative consensus rule. Could either party still “appeal” the panel report (to "nowhere") so as to block its DSB adoption, knowing that there is no AB to “complete” the appeal in the first place?

Will the AB (or the remaining AB member), the AB/WTO Secretariat (or its Director General) or the DSB chair find a way to “complete” appeals in some fashion and thereby preserve automatic adoption of panel reports? Or will “appeal as de facto veto” quickly establish itself as an available option? If so, will losing WTO Members (be allowed to) resort to it in only exceptional circumstances (using some “good faith” test) or will this become the “new normal”. Members may also renounce their right to appeal (be it ex ante or ex post; bilaterally or as a group, with or without a condition of reciprocity) or agree on other fixes so that in some (or even most?) cases panel reports may still get adopted by the DSB, following the traditional negative consensus rule, thereby preserving a core feature of today's rules-based dispute settlement.

Thirdly, assuming that the Appellate Body “disappears” (albeit temporarily) but assuming further that at least some (or even most) panel reports continue to get adopted by the DSB (a big “if”), what would this mean for panels, and how they are composed and operate, and for the broader system of WTO dispute settlement?

A couple of things immediately come to mind (I am sure there are many more) …

Without an Appellate Body, will a different type of panelists be appointed (e.g. more lawyers, more experienced/repeat appointments?)

With the role of panelists becoming more prominent, will the current division of labor between panelists and the WTO Secretariat staff supporting them, shift?

Without an Appellate Body, on which the EU and the US had a de facto seat, will the EU and the US continue to accept that, as a result of the nationality rule for panels (and the fact that the EU and the US are involved in most cases, as party or third party), few EU/US nationals sit on panels (the same will be true for China)?

Without an Appellate Body “breathing in their neck”, that is, without the risk of reversal on appeal, how will panels approach their task? Will they shorten their analysis, be more to the point? Will they be more (or less) creative or daring? Will they focus less on legal detail, and more on settling the dispute? Or will they dodge issues, provide less reasoning and thereby become less convincing?

Without an Appellate Body, will panels continue to rely heavily on past AB jurisprudence (which, over time, may age) or will panels slowly develop a new autonomy and start to explore alternative interpretations?

Without an Appellate Body, how will panels and WTO Members react to discrepancies between panel reports? Will “a thousand flowers bloom”, will some degree of consistency emerge over time (through trial and error) or will the system break when WTO Members realize that compliance or breach depends less on the facts of the case, and more on who sits on the panel …

If, indeed, the question of “who sits on the panel” becomes more important, will parties ever agree on panel composition and will the DG when appointing panelists as fallback manage to appoint individuals that remain acceptable to both parties?

If the ultimate check on panels is not risk of AB reversal, but the threat that the losing party blocks DSB adoption (assuming the option of “appeal as de facto veto” becomes available), how will that influence the analysis and approach of panels (more diplomatic, less legal)? Will panels be able to stay neutral?

Will panel reports (adopted or unadopted; consistent with or deviating from previous panel or AB reports) have the same “compliance pull” as today’s AB reports; if not, will their “compliance pull” be enough to maintain the credibility of the system?

The AB was originally (and pretty much as an “afterthought”) set up with two core functions in mind: control “rogue panels”, and offer a degree of consistency. For some, it is now the AB that has "gone rogue” and, on this view, the AB may be consistent but, at least on some issues, "consistently wrong”. Leaving aside whether this critique is justified, can the AB’s function of “control” be replaced by a renewed back-and-forth between a series of WTO panels and/or the Membership? Can the AB’s “consistency” task be fulfilled by WTO panels piecemeal coalescing around agreed lines of interpretation, with some kind of Membership input along the way? Or is, in today's context (where diversity runs high, and trust low) neither possible without some system of appellate review?

What happens in the immediate aftermath of December 10 will be crucial: not so much whether Members will be able to agree on a new type of appellate review, or to resuscitate the AB (this will probably take time, if it happens at all), but rather how WTO Members (individually and collectively), the lawyers advising them, the remaining AB member, AB/WTO Secretariat, DG and DSB chair will deal with potential "appeals to nowhere", the adoption of panel reports, and the composition and operation of panels, and, crucially, how parties and panelists themselves will behave with the AB gone.

It is one thing to lose the AB, quite another for rules-based settlement of trade disputes to end altogether. If little can be done, in the near term, to save the former (and I hope I’m wrong!), saving the latter may not be too late.

Questions posed to the panel on “Scope of and timeframe for appellate review”

• Should the objectivity of factual findings of a panel be subject to appellate review?• Should panel findings on the meaning of municipal law be subject to appellate review? How to separate the meaning of municipal law from assessing the consistency of municipal law with WTO law?• Should appellate review be limited to only those issues that need to be addressed to resolve the dispute? What is necessary to resolve a dispute? Can a dispute ever be considered ‘resolved’ when the correct interpretation of the relevant legal provision(s) is still disputed between the parties?• Should the Appellate Body refrain from modifying legal interpretations developed by panels when it agrees with the panel’s conclusion on the WTO consistency of the measure at issue?• Can the exercise of judicial economy by the Appellate Body be mandatory, and, if so, in which circumstances?• Is completing the legal analysis within the scope of appellate review under Article 17.6 of the DSU?• Is an Appellate Body report circulated after the 90-day period no longer a report to be adopted by reverse consensus?• Can a mandatory treaty rule, such as the 90-day rule of Article 17.5 of the DSU, be set aside by the parties to a dispute (whether by way of prior agreement or by ex-post deeming letters) or by a DSB decision?• Can there be exceptional or mitigating circumstances under which the Appellate Body would be entitled to exceed the 90-day timeframe, even without the consent of both parties (e.g. the circumstances in United States – Lead and Bismuth (DS138))? Who would decide on the exceptional or mitigating nature of the circumstances?• If the Appellate Body can exceed the 90-day timeframe only with the consent of the parties, what prevents an appellee from undermining or depriving an appellant of the right to appeal in large and complex disputes?• If the parties do not consent to a 90-day-plus timeframe for appellate review, or do not agree to reduce the number of issues appealed, and the Appellate Body is called upon to limit the scope of the appeal in order to stay within the 90-day timeframe, how and on the basis of which objective criteria should the Appellate Body decide to limit the scope of the appeal?• Do the parties to a specific dispute have sufficient information on the workload of the Appellate Body in other disputes to assess the time needed for the Appellate Body to complete appellate review in their dispute?• Would parties requesting a DSB decision extending the 60-day period for filing appeals under Article 16.4 contribute to resolving the ‘90-day-problem’?• Would a different calculation of the 90-day timeframe (e.g. by counting working days only) or an extension of the timeframe to 120 or 150 days resolve the ’90-day problem’?• Would the imposition of mandatory page-limits on written submissions or limits on the length of oral hearings speed up appellate review in complex disputes?• Should the random composition of Appellate Body divisions be abandoned, and appeals be assigned to Appellate Body Members with the least workload in order to speed up appellate review?• Should the Appellate Body no longer exchange views among all its Members in each appeal in order to speed up appellate review?

Questions posed to the panel on “Judicial activism and precedent”

• Can the clarification of a legal provision in accordance with customary rules of interpretation of public international law amount to judicial activism?• Are there objective criteria to determine whether the clarification of a legal provision amounts to judicial activism?• How much importance can and should be given to negotiating history in the interpretation of WTO legal provisions? Is there a common understanding of what constitutes GATT/WTO negotiating history?• Does the case law of the Appellate Body stand for the proposition that there is binding precedent in WTO dispute settlement?• What are ‘cogent reasons’ that justify deviation from established case law?• Can a panel conclude that there are cogent reasons to deviate from established case law, i.e. that the established case law is not ‘persuasive’, on the mere basis that it interprets the relevant provision differently?• What would be the terms of reference for the proposed annual meeting between the DSB and the Appellate Body to discuss developments in WTO case law? How to avoid that Members would at such meeting not merely repeat their disagreement with the Appellate Body on legal issues on which the latter ruled against them?• In deciding whether established case law is not ‘persuasive’ should a panel consider that WTO dispute settlement aims to bring security and predictability to the multilateral trading system?• If Appellate Body interpretations of WTO provisions were to be reviewed by the DSB, a DSB committee or any other body composed of representatives of WTO Members, how would decisions on the correctness of the Appellate Body interpretation be taken? By consensus? By (qualified) majority vote?• On what basis could the DSB, a DSB committee or any other body composed of representatives of WTO Members come to the conclusion that the Appellate Body’s interpretation of a WTO provision is incorrect and reflects judicial activism? Would it be on the basis of a wrong application of the customary rules of interpretation of public international law or could there also be another basis?• If the DSB, a DSB committee or any other body composed of representatives of WTO Members finds that the Appellate Body’s interpretation of a WTO provision is incorrect, what are the consequences for the panel and Appellate Body reports at issue? •If an Appellate Body interpretation of a WTO provision were to be ‘upheld’ by the DSB, a DSB committee or any other body, would this interpretation be binding on panels and the Appellate Body in all subsequent disputes?

Questions posed to the panel on “Alternatives for appellate review and WTO dispute settlement”

• Would a more in-depth and expanded interim review of panel reports replace, at least to some extent, appellate review?• Apart from the exceptional case, can parties be expected to agree before the initiation of panel proceedings not to appeal the panel report? Why would a respondent (who is statistically likely to lose the case) be willing to waive its right of appeal? Would in most cases a respondent not prefer to have a panel report that would not become legally bindingas long as there is no Appellate Body to decide on an appeal (which could be forever)?• Once appellate review under Article 17 of the DSU is no longer available, why would a respondent agree to resort to Article 25 of the DSU to allow for appellate review? Would in most cases a respondent not prefer the panel report never to become legally binding on it? • Pursuant to Article 16.4 of the DSU, a panel report is to be adopted or not by the DSB within 60 days of its circulation unless it is appealed pursuant Article 17 of the DSU. Does recourse to Article 25 of the DSU set aside Article 16.4?• Is Article 25 of the DSU sufficiently flexible for parties to agree to replicate closely the essential features of appellate review under Article 17 of the DSU? Which features cannot be replicated?• How could the Appellate Body's exchange of views be replicated or in what other way can predictability and coherence of rulings be ensured?• Are parties having recourse to Article 25 of the DSU for appellate review of panel reports free to deviate substantially from the features of appellate review under Article 17 of the DSU? In case of substantial deviation would Article 25 be (ab)used to ‘circumvent’ the DSU (see in this regard Award of Arbitrators in US – Section 110(5), footnote 22)?•At what time in the process should parties agree to resort to Article 25 arbitration to allow for appellate review of a panel report?• Can compliance with an agreement to have recourse to appeal-arbitration under Article 25 be ensured/enforced?• How should the reference in Article 25.4 to Articles 21 and 22 of the DSU be operationalized?• Are appeal-arbitrators to be appointed by the parties in each case in which they agreed to have recourse to appeal-arbitration under Article 25 DSU? Who decides on the appeal-arbitrators if and when the parties cannot agree? In other words, who would be the appointing authority?• Are appeal-arbitrators not to be to be appointed by the parties but to be selected randomly from a roster of potential appeal-arbitrators?• Who should be included in the roster of potential appeal-arbitrators? How to ensure that the membership of this roster is broadly representative of the WTO membership? Should only current and former Appellate Body members be included in the roster of appeal-arbitrators? If not, who decides on the inclusion of other persons?• Can a randomly composed division of appeal-arbitrators include arbitrators with the same nationality? Can it include arbitrators with the nationality of the participants/third participants?• Arbitration awards do not require DSB adoption to become binding, while the non-appealed findings of a panel report do require DSB adoption. When and how should the panel report, as upheld, modified or reversed by the arbitration award be adopted? Can appeal-arbitrators be expected to agree to include in their award, and thus make binding, all non-appealed panel findings?• Could/should the staff of the Appellate Body Secretariat service the arbitrators hearing and deciding appeals under Article 25 of the DSU? • When can diplomatic dispute resolution methods, such as good offices by the Director General or others, mediation or conciliation under Article 5 of the DSU, be alternatives for adjudication by panels and the Appellate Body?• Are the non-binding recommendations or findings of a mediator or conciliator likely to contribute more to the resolution of a dispute than an unadopted panel report?• Would it be feasible – legally and/or politically – to negotiate among a group of ‘willing’ WTO Members a plurilateral ‘DSU’ or a ‘DSU minus N’ which would ensure among these Members the continuation of dispute settlement as it currently exists under the DSU?• Would recourse to dispute settlement provided for under RTAs be an effective alternative for WTO dispute settlement?

These are great questions. I've posted about a few of these in the past, and if I had time would cover the rest. But there is limited time, so let me just weigh in quickly on the last one: As things stand now, recourse to dispute settlement provided for under RTAs would not be an effective alternative for WTO dispute settlement, because RTAs do not provide much coverage in the area of certain key WTO obligation, such as trade remedies.

The agreements reached between the US and Canada/Mexico, respectively, to bring an end to the Section 232 measures on steel and aluminum and the retaliatory measures adopted by Canada and Mexico contain the following provision:

“If the importing party takes such action [i.e. if the US re-imposes the Section 232 measures on steel and aluminum], the exporting country agrees to retaliate only in the affected sector (i.e., aluminum and aluminum-containing products or steel).”

Can this be read as an acknowledgment by the US that it was appropriate for Canada and Mexico to retaliate against the Section 232 measures? By imposing restrictions on the way in which Canada and Mexico can retaliate, the provision arguably lends legitimacy to the rebalancing that Canada and Mexico engaged in. If that is the case, what does this say about how the US views the legal status of its Section 232 measures?

It is hard to imagine that the US would accept retaliation (by stipulating the form in which it has to be implemented) in the case of a measure adopted for public health or environmental reasons, since the US would consider itself fully within its rights under the WTO Agreement and NAFTA to adopt such measures. Clearly, the US also feels entitled to adopt measures for national security reasons, but it seems willing to accept that other WTO Members are in turn entitled to rebalance their obligations against the US. As Simon and Huan Zhu have recently argued, this “rebalancing” solution to the national security conundrum has much to commend it, since it sidesteps the thorny question of legality and instead focuses on restoring the balance (if not necessarily the level) of concessions.

Is there any legal basis for such rebalancing? There are at least four ways to achieve rebalancing in response to national security measures – two are already available, and two are modelled on permissible responses to other types of measures:

Rebalancing under Art. XXI

If there is a war or other genuine emergency in the relationship between the parties, both parties can invoke the essential security exception, so the rebalancing can happen under Art. XXI itself.

Non-violation claims

As I have previously argued, WTO Members affected by national security measures could bring non-violation claims against those measures; if the parties reach no agreement on compensation, the affected WTO Member could impose retaliation under the procedures of DSU Art. 21 and 22.

Rebalancing on the Safeguards Model

Simon’s and Huan’s proposal analogizes national security measures to safeguard measures; it would subject the rebalancing to procedural constraints and oversight by a newly-established Committee on National Security Measures.

Rebalancing on the Cultural Exception Model

Another model for rebalancing is the Cultural Exception in Article 2005 of the Canada-US Free Trade Agreement, which still governs Canada-US relations with respect to cultural industries under NAFTA (pursuant to Annex 2106). The Cultural Industries exception provides:

Article 2005: Cultural Industries

Cultural industries are exempt from the provisions of this Agreement [subject to certain limitations]

Notwithstanding any other provision of this Agreement, a Party may take measures of equivalent commercial effect in response to actions that would have been inconsistent with this Agreement but for paragraph 1.

The fourth model strikes me as the closest analogue to the agreement embodied in the steel/aluminum settlements. The parties reserve the right to adopt certain types of measures (to protect cultural industries or for national security reasons) but accept that the other party may “retaliate … in the affected sector” or “take measures of equivalent commercial effect” in response to such measures.

The key difference between the rebalancing authorized by the Cultural Exception and the rebalancing envisaged by the steel/aluminum settlements is, of course, that the former is embedded in NAFTA, whereas the latter stands entirely apart from the international trade regime. Canada, Mexico and the US could of course integrate the steel/aluminum settlement into the renegotiated NAFTA – unless they feel that that would take the recognition of the legitimacy of revived Section 232 measures on steel and aluminum and of the inevitable retaliation against such measures a step too far.

After extensive discussions on trade in steel and aluminum covered by the action taken pursuant to Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. §1862), the United States and Canada have reached an understanding as follows:

...

4. The United States and Canada will establish an agreed-upon process for monitoring aluminum and steel trade between them. In monitoring for surges, either country may treat products made with steel that is melted and poured in North America separately from products that are not.

5. In the event that imports of aluminum or steel products surge meaningfully beyond historic volumes of trade over a period of time, with consideration of market share, the importing country may request consultations with the exporting country. After such consultations, the importing party may impose duties of 25 percent for steel and 10 percent for aluminum in respect to the individual product(s) where the surge took place (on the basis of the individual product categories set forth in the attached chart). If the importing party takes such action, the exporting country agrees to retaliate only in the affected sector (i.e., aluminum and aluminum-containing products or steel).

The idea here is that after the removal of the duties there might be new duties imposed in order to protect against import surges (such duties would not be consistent with NAFTA/WTO rules), and that retaliation (also outside the rules) would be expected, subject to certain limits.

But there doesn't seem to be a mechanism to resolve disputes over any of this through a neutral adjudicator. Without such an adjudicator, how will the process work? If the United States thinks there is a surge "meaningfully beyond historic volumes," but Canada and Mexico do not, who will resolve that disagreement? Going in the other direction, the retaliation is supposed to be "only in the affected sector," but if Canada and Mexico believe the United States is not complying with its obligations in imposing the tariffs, would they comply with the limits on retaliation? Without neutral adjudication to govern all this, it seems like the situation could turn into an escalating tariff war pretty quickly.

the underlying issue is whether the court will revive the long-dormant principle that Congress cannot delegate its legislative power to executive agencies. The court has not struck down a federal law as an excessive delegation of legislative powers since its 1935 rulings in A.L.A. Schechter Poultry Corp. v. United States and Panama Refining Co. v. Ryan. The court has said that delegations must have intelligible standards to guide the exercise of discretion, but the reality has been that all delegations have been upheld.

This case is relevant for the constitutional challenge against Section 232, discussed here. The CIT has ruled in that case, and the plaintiffs are trying to go directly to the Supreme Court. Some of my Cato colleagues have filed an amicus brief in support of the cert petition. Here is an excerpt:

QUESTION PRESENTED

This case presents a facial challenge to Section 232 of the Trade Expansion Act of 1962, as amended, 19 U.S.C. § 1862, and its use to impose more than $4.5 billion of tariffs on steel products, on the ground that Section 232 unconstitutionally delegates legislative power to the president in violation of Article I, Section 1 of the U.S. Constitution and the principle of separation of powers. A three-judge panel of the Court of International Trade held that it was bound by this Court’s decision in Federal Energy Administration v. Algonquin SNG, Inc., 426 U.S. 548 (1976), which rejected a statutory challenge to the president’s order under Section 232 and an undue delegation argument offered to bolster that challenge.

Petitioners present two questions in their petition before judgment (which they file because an appeal to the Federal Circuit would not advance the development of the law): (1) whether the C.I.T. erroneously found Algonquin to be controlling; and (2) whether Section 232 is facially unconstitutionally because its congressional delegation lacks an intelligible principle. Amicus speaks to both of these issues by addressing the following question:

Whether the Court of International Trade erroneously concluded that rationality review is not a necessary complement to a permissible delegation of Congress’s power to regulate foreign commerce under Section 232 of the Trade Expansion Act.

More here:

Although “[t]he Constitution sought to divide the delegated powers of the new Federal Government into three defined categories, Legislative, Executive, and Judicial,” INS v. Chadha, 462 U.S. 919, 951 (1983), the Framers “understood that a hermetic sealing off of the three branches of Government from one another would preclude the establishment of a Nation capable of governing itself effectively,” Loving v. United States, 517 U.S. 748, 756 (1996) (cleaned up). Accordingly, the nondelegation doctrine is a flexible check against the dangerous concentration of power, which is, of course, the purpose of the separation of powers principle. See The Federalist, No. 47 (Madison) (“There can be no lib-erty where the legislative and executive powers are united in the same person.”).

At a minimum, the nondelegation principle requires that Congress delineate the boundaries of its delegated authority with an “intelligible principle.” J.W. Hampton Jr., & Co. v. United States, 276 U.S. 394, 409 (1928). Yet courts historically have linked nondelegation analysis to some sort of mechanism—typically judicial review or robust administrative procedures—to police the delegee. See, e.g., Mistretta v. United States, 488 U.S. 361, 379 (1989) (“Only if we could say that there is an absence of standards for the guidance of the Administrator’s action, so that it would be impossible in a proper proceeding to ascertain whether the will of Congress has been obeyed, would we be justified in overriding its choice of means for effecting its declared purpose.”) (quoting Yakus, 321 U.S. at 426); see also Amalgamated Meat Cutters & Butcher Workmen of N. Am., AFL-CIO v. Connally, 337 F. Supp. 737, 744 (D.D.C. 1971) (three-judge panel) (“The claim of undue delegation of legislative power broadly raises the challenge of undue power in the Executive and thus naturally involves consideration of the interrelated questions of the availability of appropriate restraints through provisions for administrative procedure and judicial review.”).

An analysis of Section 232 confirms the obvious and essential relationship between the nondelegation principle and the availability of meaningful judicial review. In Fed. Energy Admin. v. Algonquin SNG, Inc., this Court located Section 232’s “intelligible principles” in the requirements that the president regulate for “national security” purposes, and that the regulation pertain to “imports.” 426 U.S. 548, 559 (1976). Although these are capacious concepts, Congress did not intend for courts to allow the president to simply cite “national security” and “imports” as pretenses for unfettered regulatory power. To the contrary, if a regulation promulgated under Section 232 is not confined within the standards prescribed by Congress, then the tariffs lie outside the president’s delegation and are, therefore, ultra vires. In Algonquin, the Court implicitly acknowledged that the statute’s intelligible principles amount to judicially testable standards when ob-serving that the “broad” phrase “’national interest’ . . . stands in stark contrast with [Section 232’s] narrower criterion of ‘national security.’” Id. at 569.

...

To be sure, this Court is rightfully reluctant to exercise non-statutory review when the president’s statutory authority implicates political questions. See, e.g., Orloff v. Willoughby, 345 U.S. 83, 90 (1953) (denying review of president’s exercise of statutory authority to regulate the commissioning of Army officers); Dakota Cent. Telephone Co. v. S.D. ex rel. Payne, 250 U. S. 163, 184 (1919) (denying review of president’s assessment of state of war as a statutory condition for regulation).

Section 232 of the Trade Expansion Act, by contrast, results from the operation of Congress’s “exclusive and plenary” authority to regulate international commerce. See Board of Trustees of Univ. of Ill. v. United States, 289 US 48, 56 (1933); see also Am. Inst. for Int’l Steel, Inc., 2019 WL 1354084, at *7 (Katzman, J., dubitante) (explaining that “the power to impose duties is a core legislative function”). Indeed, the lay-ing of duties is one of the very few broad regulatory tasks that was once performed directly by lawmakers via a long series of detailed and specific tariff acts passed up through the early 20th century. See George Bronz, The Tariff Commission as a Regulatory Agency, 61 Colum. L. Rev. 463, 464 (1961) (listing tariff acts). Although the president has a constitutional role in foreign commerce during peacetime, that function is limited to the negotiation of international agreements. See, e.g., Pub. Citizen v. U.S. Trade Rep., 5 F. 3d 549, 552 (D.C. Cir. 1993) (refusing to review the president’s decision making in the exercise of statutory authority to negotiate a multilateral trade agreement).

Yet even where, as here, the president’s statutory powers do not implicate political questions, the Court nevertheless might be reluctant to review presidential decision making, out of concern over comparative institutional competencies. As observed in Boumediene v. Bush, “neither the Members of this Court nor most federal judges begin the day with briefings that may describe new and serious threats to our Nation and its people.” 553 U.S. 723, 797 (2008). Such concerns about relative expertise, would be misplaced in this case, however, because a properly attenuated reasonableness review doesn’t require subject-matter familiarity.

In Franklin v. Massachusetts, this Court foreclosed so-called “hard look” review of the president’s statutory powers. See 505 U.S. at 800–01. Therefore, some-thing less than a “searching and careful” review—the “hard look” standard—is required. See Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971). These background principles suggest that a properly attenuated review of presidential regulation is confined to the subset of “hard look” factors that are independent of subject-matter familiarity.

The first is the “simple but fundamental rule of administrative law” that the delegee of congressional power must set forth the grounds on which it acted. See SEC v. Chenery Corp., 332 U. S. 194, 196 (1947). The second is a corollary of the first and entails the “duty to explain [a] departure from prior norms.” Atchinson, T. & SFR Co. v. Wichita Bd. of Trade, 412 U.S. 800, 808 (1973) (citations omitted). The third fac-tor on this non-exhaustive list serves to ensure that the delegee does not “rel[y] on factors which Congress has not intended it to consider.” Motor Vehicle Mfrs. Assn. of United States, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).

None of these “not so hard look” factors require courts to possess any expertise beyond common sense. And all of them are offended by the president’s Section 232 steel tariffs. To cite an obvious example, the president offered no explanation for his choice of 25 percent tariffs on imported steel. This is a plain violation of the “fundamental rule” that a delegee of congressional authority must at least explain its regulation.

The Section 232 regulations on steel imports also departed radically from prior practice without explanation. For example, where the president’s Section 232 regulations might have macroeconomic effects, the Department of Commerce weighed the costs against the benefits. See U.S. Dep’t of Commerce, The Effect on the National Security of Imports of Crude Oil and Refined Petroleum Products, at ES-9 (Nov. 1999) (“The Department concurs with the conclusions of the 1994 and 1988 studies that, on balance, the costs to the national security of an oil import adjustment outweigh the potential benefits.”). Despite this consistent prior practice, neither the department’s recommendation nor the president’s proclamation acknowledged the costs of the Section 232 regulation.

As noted above, the president departed from his predecessors’ uniform practice of accounting for the regulated countries’ relationships with the United States. Also noted already, the president and the secretary of commerce impermissibly relied on extraneous factors by basing the Section 232 regulation on the inefficiency of other forms of statutory import relief, which was precisely what Congress intended to avoid.

The Section 232 steel regulation bears other conspicuous signs of irrational decision making. The point here, however, is to show that judicial review can be tailored to the president such that it requires no subject-matter expertise. Under this limited oversight, the regulation does not withstand scrutiny.

After extensive discussions on trade in steel and aluminum covered by the action taken pursuant to Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. §1862), the United States and Canada have reached an understanding as follows:

1. The United States and Canada agree to eliminate, no later than two days from the issuance of this statement:

a. All tariffs the United States imposed under Section 232 on imports of aluminum and steel products from Canada; and

b. All tariffs Canada imposed in retaliation for the Section 232 action taken by the United States (identified in Customs Notice 18-08 Surtaxes Imposed on Certain Products Originating in the United States, issued by the Canada Border Services Agency on June 29, 2018 and revised on July 11, 2018).

2. The United States and Canada agree to terminate all pending litigation between them in the World Trade Organization regarding the Section 232 action.

3. The United States and Canada will implement effective measures to:

a. Prevent the importation of aluminum and steel that is unfairly subsidized and/or sold at dumped prices; and

b. Prevent the transshipment of aluminum and steel made outside of Canada or the United States to the other country. Canada and the United States will consult together on these measures.

4. The United States and Canada will establish an agreed-upon process for monitoring aluminum and steel trade between them. In monitoring for surges, either country may treat products made with steel that is melted and poured in North America separately from products that are not.

5. In the event that imports of aluminum or steel products surge meaningfully beyond historic volumes of trade over a period of time, with consideration of market share, the importing country may request consultations with the exporting country. After such consultations, the importing party may impose duties of 25 percent for steel and 10 percent for aluminum in respect to the individual product(s) where the surge took place (on the basis of the individual product categories set forth in the attached chart). If the importing party takes such action, the exporting country agrees to retaliate only in the affected sector (i.e., aluminum and aluminum-containing products or steel).

As noted in point 2 above, one thing this means is that 2 of the 9 WTO complaints (DS550 and DS551) against the U.S. Section 232 tariffs will be withdrawn, and 2 of the 6 U.S. complaints (DS557 and DS560) against the retaliation will be withdrawn. That's good news. It would be nice if we could achieve similar outcomes on the rest of the complaints.

This has been a difficult time for the WTO. Stories of the deepening crisis in the Dispute Settlement Body, and the looming threat of a President who has threatened to pull the US out have all been headlines in recent months. This year coincides with the 30th anniversary of the Trade Policy Review Mechanism, so this is a perfect time for a stock-taking on what the empirical research on TPRM tells us. It is well worth recalling Brett Williams’ recent observation that TPRM evolved into something that was very different from what was originally proposed. While TPRM is far from perfect, there are some welcome signs in findings from scholarly research, suggesting grounds for optimism even in these very trying times.

1. TPRM engages the membership

One way to think about TPRM’s value as a tool is to evaluate the extent to which peer review is participatory. The dialogue on trade disputes is largely conducted by developed countries with each other. TPRM does not follow the same practice. A recent study suggests that TPRM discussions are increasingly democratic, as almost all member countries either participate in the peer review through submitting questions by themselves (80%) or as part of a group (an additional 13%). Rising powers are particularly active, with China, Brazil, and India each more active than Japan. These authors evaluate the factors that predict engagement in TPRM, and find that those members with high trade exposure, democracies, and countries with a large number of memberships in international organizations are more likely to participate in the peer review.

The most recent trade policy review for the United States from last December underscores the inclusive nature of the peer review process. Thirty-nine countries and the European Union submitted over 1,700 questions to the US, and an additional 27 countries made statements during the review, including two representing country groups (Central African Republic on behalf of the LDC group and Thailand on behalf of ASEAN). More than half of the countries that made statements were classified by the World Bank as either low-income or lower-middle income countries.

2. Member countries are treated the same in the TPRM

Studies of international organizations often find that geopolitical influences shape their behavior. We might expect the Trade Policy Review Mechanism to work the same way, treating larger countries differently from smaller ones. One way to study this is to exploit the design of the mechanism itself, as both the country being reviewed and the Secretariat issue reports on the country that form the basis for the review. Understanding the extent to which these reports say the same thing, then, can tell us something about the degree to which WTO monitoring is shaped by geopolitical influence.

In my recently published book, I perform this exact exercise. Countries are certainly tempted to present a positive self-image in peer review even when they are violating trade rules. I find that the Secretariat does in fact speak truth to power, even with the US and the EU. The most recent Trade Policy Review of the US recounts the recent record of countries filing disputes against the US in response to its trade actions against them. While it is not critical of member countries, it does not overlook the shortcomings of even its most powerful members.

3. TPRM can make a difference under some conditions

Answering the question of “does TPRM work?” is not easy. The mechanism is designed to reveal information rather than enforce policy changes. Countries are named and shamed in the TPRM by their peers, but this does not always occur evenly across all countries and times. Nevertheless, some quantitative evidence suggests that WTO members show improvements in some metrics of governance over time.

A strong test of whether TPRM makes a difference requires that we consider the effects of the review process on a country’s willingness to impose anti-dumping or countervailing duties. In tests of pairs of developing countries, I found some evidence that countries are more willing to impose these duties on other countries in the years following a trade policy review. This suggests that the timing of the review might serve as a mild deterrent against opportunistic behavior.

4. Information from TPRM doesn’t travel as far as we would like.

Thinking about TPRM as an informational mechanism rather than as an enforcement tool raises questions of how this information is used and disseminated. In order to generate policy change, we would ideally want the findings from these reviews to be reported in the media and receive attention in domestic political debates. Evaluating China’s Trade Policy Reviews between 2006 and 2016, I found little evidence that they were referenced on Capitol Hill in congressional discussion, and little evidence that these reports were addressed by the media. Future progress in making TPRM more influential lies in making sure the messages from the review are more readily disseminated to politicians and the public. Given that the WTO is competing with domestic think tanks for the same market, this is a tall order.

5. What should we be concerned about moving forward?

We should be mindful of two institutional constraints placed on TPRM by the WTO itself. The first is that of the calendar. The WTO is addressing a backlog of needed reviews by slowing its pace. Under the old system, the frequency with which countries were reviewed was a function of their size: large economies every two years, and then four and six. This system has now been moved to every three, five, and seven years. While this will reduce the backlog, it also means that there is less multilateral monitoring of a deepening trade crisis between the US, China, and Europe.

The second is a lack of review of the TPRM by the WTO. The mechanism is reviewed every five years by member countries, but these evaluations are conducted by the members, and are largely pro-forma. After 30 years, it is time for a more in-depth assessment of TPRM. Other international organizations use internal staff resources to carefully take stock of their critical procedures. The IMF, for example, is engaged in such an enterprise right now, evaluating both surveillance and conditionality. This sort of detailed assessment is needed, and it can make the difference between whether the TPRM’s next anniversary is cause for celebration or concern.

President Donald Trump on Wednesday signed an executive order laying the groundwork to block Chinese telecommunications companies like Huawei from selling equipment in the U.S., a move aimed at neutralizing Beijing’s ability to compromise next-generation wireless networks and U.S. computer systems.

The order prohibits the purchase or use of any communications technology produced by entities controlled by “a foreign adversary” and likely to create an “undue risk of sabotage” of U.S. communications systems or “catastrophic effects” to U.S. infrastructure.

The Commerce Department has 150 days to produce rules that can identify “particular countries or persons” as foreign adversaries. Those rules are almost certain to name China, Huawei, or both.

...

Trump’s long-awaited executive order invokes the International Emergency Economic Powers Act and declares a national emergency to empower the government to block the purchase of technology linked to foreign adversaries.

These rules have great potential to be abused for protectionist purposes, and it is easy to imagine that they will be. In addition, a ban on these products would surely violate various GATT obligations, and presumably the United States would try to justify the ban under GATT Article XXI. I have no idea how a WTO panel would find, but if it found the violation was not justified under Article XXI, I would be shocked if the United States withdrew the ban.

All of this is a way to bring up the forthcoming article I mentioned last week, where I proposed rebalancing for these situations. Some measures of this kind will be justified, so it is not reasonable to expect the WTO to completely prohibit them. What is reasonable, however, is that when governments invoke national security in this way, and upset the balance of the negotiated agreement, they accept some rebalancing, either through compensation or retaliation.

As much fun as it is to think about what GATT Article XXI means, and to analyze WTO panel reports that interpret and apply it, I'm skeptical that WTO litigation about measures for which the responding party has invoked the national security exception will help resolve many trade conflicts. The ongoing case of the U.S. Section 232 measures will be particularly challenging.

As discussed previously on this blog, I don't think the Section 232 measures can be characterized as safeguard measures, and therefore the rebalancing process provided there is not available. But I do think rebalancing is a good idea for this kind of case. Here is the abstract of a paper I wrote with a Cato colleague proposing a special rebalancing process to deal with national security trade restrictions:

A Proposal for 'Rebalancing' To Deal With 'National Security' Trade Restrictions

Over its first two years, the Trump administration has aggressively reshaped U.S. trade policy. One of its most controversial initiatives is the expansive use of “national security” to justify imposing tariffs and quotas. Section 232 of the Trade Act of 1962 gives the president authority to restrict imports on this basis after an investigation by the Commerce Department, and the administration has already done so for steel and aluminum and is now threatening similar actions on automobiles. The World Trade Organization (WTO) has a special exception for such measures, so there is at least an argument that they are permitted under international law. However, the administration has taken what was previously considered a narrow and exceptional remedy and broadened it to serve as a more general tool to protect domestic industries.

This paper argues that WTO dispute settlement cannot easily resolve disputes of this kind, and suggests an alternative mechanism to handle these issues. Instead of litigation, a “rebalancing” process like the one used in the context of “safeguard” tariffs and quotas should be utilized for national security measures. Safeguards are a political safety valve that allow the trading system to pursue broad-based liberalization by providing the flexibility to protect domestic industries under certain conditions (ideally, by offering compensatory liberalization elsewhere). By adopting a similar political arrangement for national security trade restrictions, the overall balance in the system can be preserved, permanent damage to the WTO dispute system avoided, and a potentially destructive loophole kept closed.

The proposal does not work out all the details of the rebalancing process, and if anyone likes the idea there is plenty of fleshing out to do, so I encourage others to write more about this.

Two other points: We wrote this before the Russia - Traffic in Transit panel report was circulated; and we do not imagine the Trump administration will support this idea (but who knows!), so our suggestion is that other governments could incorporate such a provision in their FTAs in order to test it out.

Do you agree with Leader Schumer that President Trump is doing the right thing when it comes to the Chinese?

HARRIS: I think that part of the failure of this administration on foreign policy as general matter is that this president and this administration have failed to understand that we are stronger when we work with our allies on every issue, China included.

TAPPER: China is an ally?

HARRIS: No, meaning working with our allies to address China, in terms of the threat that it presents to our economy, the threat it presents to American workers and American industries.

But we -- but, instead, this president seems to believe and has a preference for conducting trade policy, economic policy, foreign policy by tweet. And that's irresponsible. It is a display of a president who thinks that -- apparently, that unilateral action is better than working with the friends to address issues that not only impact our country, but impact the globe.

[09:05:00]

And I think it puts us in a weaker position.

TAPPER: As a more broad manner, President Trump, on the campaign trail 2015-'16 and as president, says, trade deals in this country, by Democrat presidents and by Republican presidents, have been too tilted towards helping corporations and helping Wall Street and too tilted against the middle class and the manufacturing sector.

Do you disagree with that premise?

HARRIS: I believe that there is no question that, over many decades, the rules have been written in a way that have been to the exclusion of lifting up the middle class and working people in America and working families in America.

And, in fact, that's why I'm proposing that one of the things that we do to address that is that we reform the tax code in a way that we'll give middle-class working families that are making less than $100,000 a year a $6,000 tax credit that they can receive it up to $500 a month.

TAPPER: But on the subject of trade, it doesn't sound like you disagree with the president on his premise, on his general argument that the middle class keeps getting screwed by these trade deals, and he's trying to renegotiate better deals.

HARRIS: I believe that we have got to have policy that better protects American workers and American industries.

I believe very strongly that we have to have policies that understand that, as it relates to the issue of trade, as it relates to the issue of various countries, including China, which we just talked about, that we have to supply and equip the American worker with the skills and the resources that they need to thrive, not only survive, but thrive.

TAPPER: Trade has been drawing some dividing lines in the Democratic field, when it comes to NAFTA, for example.

Bernie Sanders, one of your opponents, attacked Joe Biden, another one of your opponents, last week, saying -- quote -- "I helped lead the fight against NAFTA. Biden voted for NAFTA."

Who is right on NAFTA, Biden or Sanders?

HARRIS: Well, I'm not going to choose between the two of them.

(LAUGHTER)

HARRIS: But I will tell you...

TAPPER: Well, would you have voted for NAFTA?

HARRIS: I would not have voted for NAFTA, and because I believe that we can do a better job to protect American workers.

I also believe that we need to do a better job in terms of thinking about the priorities that should be more apparent now perhaps than they were there, which are issues like climate, the climate crisis, and what we need to do to build into these trade agreements.

I thought her answer to the question about how best to address concerns with China's trade practices was pretty good in terms of its condemnation of the Trump administration's approach. Tapper put Chuck Schumer's "hang tough" message out there, and she clearly moved away from the Schumer statement and towards working with allies, something that is not happening to a great extent right now. It's not clear what Harris sees as "tough," or how she views tariffs, but it seems like she clearly rejects unilateralism.

The rest of her comments are a bit vague. She wants to "better protect American workers and American industries," and "to supply and equip the American worker with the skills and the resources that they need to thrive." That could mean a lot of different things (e.g. reforming the tax code, as she mentions, or using tariffs).

And saying she would not have voted for NAFTA doesn't really mean much at this point. The question is, what kind of trade agreements or trade policy does she want going forward? She talks about "issues like climate, the climate crisis, and what we need to do to build into these trade agreements." This sounds like it would fit very nicely with EU trade policy, so does this mean a US-EU trade deal would be on her administration's agenda?

Normally, I don't expect much substantive discussion of trade policy during a campaign, but given the importance of trade policy these days, maybe we will get more exchanges like the one above, hopefully with even more specifics.

This is a guest post from Ben Heath, Acting Assistant Professor of Lawyering at NYU Law

This post is the last in a series to analyze the Russia — Transit panel report on the GATT security exception. In the first post, I introduced what Julian Arato and I are calling the “stewardship function” of international courts: that is, their role in ensuring the continued relevance of, adherence to, and integrity of a legal order. The second and third posts showed how the Russia — Transit report cleared the way for this stewardship function by carving out the legal space for panels to judge trade issues that are embedded in sensitive political disputes, and by aggressively asserting the factfinding authority of trade panels. The fourth post argued that the sliding-scale test introduced by the panel in this report is designed to be flexible, politically sensitive, and managed over time in a way that embodies this idea of stewardship.

This final post focuses on the implications of the stewardship function for security-related disputes at the WTO and elsewhere. First, adopting a kind of judicial stewardship function over the trade/security boundary makes a good degree of sense in the long run, notwithstanding the likelihood of backlash in the near term. But, second, judicial stewardship depends on an institutional context that may be evaporating in the trade regime, and is wholly lacking in investment law. This creates a significant risk that the principles announced in the Russia — Transit report could be deformed through future judicial borrowing.

I. Stewardship and the Future of Security Governance

I see at least three potential benefits to the panel’s flexible and politically sensitive approach to security governance. Only the first of these benefits is directly implicated by the language of the panel’s report. The other two are more long-term speculations as to how the vision embedded in the report could be developed and applied in future cases. Furthermore, all three of these benefits are unlikely to materialize in the short run, given that powerful states seem unlikely to permit the WTO system to develop the authority necessary to fully implement this stewardship function.

First, as I have argued elsewhere, the economic order is going to endure increasing pressure as an ever-widening array of issues comes under the national security umbrella. Consider two examples: cybersecurity, which has increasingly risen to prominence in the national security discourse; and climate change, which is also recently been the subject of significant legal and political discourse around security and emergency. Each of these issues presents a potentially serious threat with authentic connections to national and international security, while at the same time being prone to abuse for protectionist motives. Each threat also requires some work to fit into the logic of Article XXI of the 1947 GATT. The sliding scale approach developed by the Russia — Transit panel could provide enough adjustable levers to allow in these new threats, while still closely scrutinizing new security measures for disguised restrictions on trade.

Second, the flexible doctrines announced by the panel could provide some opportunity for cultivating what Jeff Dunoff, channeling Alexander Bickel, has called the “passive virtues.” These are doctrines, like justiciability (standing, ripeness, etc.), which allow courts to manage their legitimacy by controlling “whether, when, and how much to adjudicate.” The sliding scale announced by the panel in this case could serve a similar function. It is sufficiently flexible to allow for a politically sensitive and variable standard of review, for the recovery of a notion of institutional balance in the face of deeply contested political/security issues, or possibly for catalyzing good-faith negotiation among treaty parties about cybersecurity or other difficult and currently under-legalized issues. In the long run, these moves could help tribunals and panels avoid charges of overreach, even as they eschew the idea that the security exception is entirely “self-judging.”

Third, and most speculatively, this approach in the long run could help recover the channeling function that, as Tim Meyer notes, Article XXI is particularly bad at fulfilling. “Channeling,” as used here, refers to the ability of exceptions like antidumping, safeguards — or envisioned rules for social dumping or economic development — to funnel the protectionist impulses of domestic coalitions through a framework that imposes some procedural and substantive requirements to prevent abuse. A wide-open security exception, Meyer notes, is ill-suited to performing this function, and provides a readymade legal justification for coalitions of industry and principled actors (environmentalists, human rights advocates, or those concerned about economic opportunity) to seek protectionist trade measures. The sliding-scale approach to Article XXI, by contrast, could enable panels to use the good-faith obligation as a basis for investigating the process by which such measures were adopted, demand some minimum degree of fairness, and screen for abuse.

This is not to say that the stewardship approach to security is necessarily a welcome one. The panel’s approach is highly flexible and indeterminate, and it delegates a significant degree of discretion to the judicial mechanism of the WTO. Ultimately, if the stewardship role is to be sustained, it will require panels to retain a significant degree of authority over security matters, aggressively assert their factfinding role, and continually develop and refine legal doctrines beyond what may be necessary for the resolution of a particular case. We have already seen the United States respond extremely critically to all three aspects of the Russia — Transit panel report. And other states, while perhaps more comfortable with this result, may not be willing to accept the full implications outlined above.

This is why, in my writing, I’ve been more optimistic in the near term about political settlements, rather than judicial decisions, that could restore institutional balance and enable the political bodies of the WTO to take on more of this stewardship role. (Robert McDougall has published a helpful guide to some of these policy options.) Nevertheless, the panel’s report will continue to provide a potential roadmap for future courts and tribunals to develop and implement this stewardship function.

II. Stewardship, Transplanted

The other problem with the vision of stewardship in the Russia — Transit report is that it lacks the necessary institutional context. Stewardship, as Julian Arato and I are coming to understand it, works when courts can receive political signals through stable channels, can develop legal doctrines that are responsive to those signals, and can manage this process over time. This requires a relatively stable institutional context, and, as Julian explored in his critique of the margin of appreciation in investment law, is ill-suited to ad hoc dispute settlement, where panels and tribunals have no continuing existence.

Here, we are working with a report of a single WTO panel, not the Appellate Body. This report, moreover, has already been adopted and will not be appealed. Moreover, the future of the WTO Appellate Body itself is deeply uncertain, raising the possibility that future WTO disputes will be resolved, if at all, by a loosely connected set of ad hoc panels, which are not overseen by any centralized judicial body. In short, while the panel’s approach in this case has an affinity with the “selective judicial minimalism” that Rob Howse describes in his study of the Appellate Body, it lacks the centralized institution to manage this selectivity. This increases the risk that future panels will partially implement passages or doctrines from the Russia — Transit report, in ways that distort the single, integrated approach envisioned by the panel.

These risks, moreover, are likely to be amplified once the report starts being used in investor-state dispute settlement, which it almost certainly will. In this context, there is no centralized institution that can engage in a similar kind of responsive give-and-take with political bodies. This may change if the proposed Multilateral Investment Court becomes a reality. Even there, however, current proposals for the MIC envision only a limited institutional structure for deliberation and give-and-take between political and judicial bodies. Moreover, existing investment treaties contain a wide variety of security exceptions, many of which lack language analogous to Article XXI(b)(i)-(iii), which provided the critical textual hook for the panel’s sliding-scale approach in this case.

All of this raises the concern that the decision of the Russia – Transit panel will become distorted as it is dislodged from its institutional context and pulled apart by litigants in other fora. For this reason, although the panel’s decision might be considered a sensible one in this political and institutional setting, it remains to be seen how well the concepts announced here will “travel” to other fora.

This is from the Graduate Institute’s Centre for Trade and Economic Integration and Georgetown Law's Institute of International Economic Law:

The 2019 G2 Annual Conference on WTO and Global Economic Regulation, jointly organised by the Graduate Institute’s Centre for Trade and Economic Integration and Georgetown Law's Institute of International Economic Law, will be held in Geneva, from 7 to 8 June 2019.

The G2 Annual Conference on WTO and Global Economic Regulation, which has its origins in the partnership created in the year 2000 between University Professor John H. Jackson of Georgetown, and Professor Sir Francis Jacobs, KCMG, QC, a Trustee of BIICL, has a longstanding affiliation with the Journal of International Economic Law (JIEL), published by the Oxford University Press. Widely considered one of the most important and prestigious conferences addressing developments in international economic law, the G2 Conference pursues cutting-edge issues of interest to academics and practitioners alike.

You are therefore wholeheartedly invited to register by accessing this link, which contains more information about the speakers and venues.

Please note, moreover, that the session of 8 June will be followed by the Grand Final of the John H. Jackson WTO Moot Court Competition. The location for each day is noted below:

In November 2017, I authored a paper warning that the Trump Administration was seeking to eviscerate World Trade Organization (WTO) dispute settlement. At the same time, I put forward a specific proposal for what the Appellate Body could do to save the Dispute Settlement Understanding (DSU) of the WTO (Steve Charnovitz, "How to Save WTO Dispute Settlement from the Trump Administration, 3 November 2017, https://worldtradelaw.typepad.com/ielpblog/2017/11/how-to-save-wto-dispute-settlement-from-the-trump-administration.html). My proposal was for the Appellate Body to amend its rules to state that in the event three or more vacant appellator slots existed, that the "completion of the appeal" would automatically occur on the same day that any appeal was lodged. Had the Appellate Body adopted my plan, they could have insulated the WTO dispute system from the impending nightmare scenario of a right of any WTO defendant government to block the adoption of a WTO panel report merely by appealing it to an out-of-business Appellate Body.

Unfortunately, the Appellate Body did not adopt my rescue plan.

Now, over 18 months later, the WTO continues to struggle with the implications of United States rejectionism against the trading system. In recent weeks, I have noticed an increase in new disturbing trends at the WTO. I've seen well-intentioned WTO member governments offering proposals to rewrite the DSU in an effort to appease the Trump Administration.

I had hoped by now that governments had learned that appeasement of authoritarians never works. The Trump Administration is seeking to destroy the international rule of law on trade, and other WTO members should not be accomplices in this mayhem.

There are worse things than losing an Appellate Body or losing the automatic adoption of WTO panel reports.

On 7 May 2019 in Geneva, Trump's Ambassador to the WTO Dennis Shea gave a tough speech to the WTO General Council. The Ambassador's remarks were replete with misstatements of trade law and misstatements of fact. This was par for the course in an Administration that seems to believe that if one repeats a falsity enough, it will become true.

So far, I have not seen any refutation of Ambassador Shea's spurious assertions. So, for the record, let me debunk them one by one.

Shea's first claim is that there is a DSU rule that "A person who has ceased to be an Appellate Body member may not continue deciding appeals as if his term has been extended by the Dispute Settlement Body." That claim is untrue because the Appellate Body, pursuant to its authority in DSU Article 17.9, enacted Working Procedures back in the mid-1990s that provided for the contingency of an expiration of an appellator term during the pendency of an appeal on which the appellator had been assigned to "serve." This administrative law (Rule 15) allows such an appellator to complete his or her service on that appeal. The Trump Administration has suggested that Rule 15 is ultra vires, but DSU Article 17.1 does not contain any conflicting black letter law that in the event that an appellator term expires, the appellator must resign from a tribunal.

Consider this counterfactual: If the Appellate Body had not written the wise contingency rule (in Rule 15), the Appellate Body would have had to discontinue many ongoing appeals when one of the sitting appellator's term ended. Scotching ongoing appeals might have been convenient for the United States which is the most frequent WTO defendant and the most frequent loser of WTO cases against it. But judicial dissolution would have been a bad outcome for the WTO dispute system.

Second, Shea asserts that there is a DSU rule that "The Appellate Body may not make findings on issues of fact...." No authority was offered for that proposition and certainly the DSU does not forbid the Appellate Body from making incidental statements of fact. Of course, the Appellate Body should not entertain new facts and or substitute itself for the panel's role as the trier of facts. But the Appellate Body has not done so. The DSU does say that appeals "are limited to issues of law," but that basis for appeal should not be understood to prohibit the Appellate Body from addressing the facts necessary to accomplish its mandate "to uphold, modify or reverse the legal findings and conclusions of the panel" (DSU Article 17.13).

Third, Shea asserts that there is a DSU rule that "The Appellate Body may not give advisory opinions on issues that will not assist the DSB [Dispute Settlement Body] in making a recommendation to bring a WTO-inconsistent measure into compliance with WTO rules." While there is no DSU rule stating that proposition exactly, no one would deny that the Appellate Body should not be issuing advisory opinions. But the Appellate Body has not issued such opinions. Thus, Shea's assertion that "the DSU provides for rules, and "those rules have been broken with impunity by the Appellate Body" is false. So is his assertion that the Appellate Body "is disregarding the clear rules."

Fourth, Shea argues that there is a rule that "The Appellate Body may not assert that its reports serve as precedent or provide authoritative interpretations." Certainly, nothing in the DSU prohibits tribunal decisions from being considered as precedent by future tribunals. The entire history of dispute settlement in the General Agreement on Tariffs and Trade (GATT) going back to the early 1950s shows the regular attention by tribunals to precedent. Quite rightly, the Appellate Body has posited that absent cogent reasons, an adjudicatory body will resolve the same legal question in the same way in a subsequent case. Consistent with the approach taken by other newly-created international tribunals over the past century, the WTO Appellate Body has sought to clarify its role as a higher-level tribunal in a continuing legal system. As the DSU explains, WTO dispute settlement "is a central element in providing security and predictability to the multilateral trading system" (DSU Article 3.2). Imagine the hypothetical of the Appellate Body stating in its rules that panels should feel free to consider every case de novo and to flout the jurisprudence of the Appellate Body. Certainly, such a disconnected legal system would have failed to provide the security and predictability sought by the United States and other WTO governments who drafted the DSU. Finally, I know of no evidence that the Appellate Body has ever said that is rulings are "authoritative interpretations," and Shea cites no caselaw to that effect.

Fifth, Shea states that "the Appellate Body may not change Members' substantive rights or obligations as set in the text of the WTO agreements." That statement is true as evidenced by DSU Article 19.2. But the Trump Administration's assertion that the Appellate Body has broken this rule is false. The biggest problem the United States has with the Appellate Body is that the United States has lost an obscene number (presently 49) cases against it for violating WTO trade remedy rules. The perennial arguments by the US Trade Representative about the Appellate Body have little to do with WTO constitutional principles. Rather, the behavior of US trade officials can be explained by the longtime US abuse of trade remedies (like antidumping duties) to protect politically connected US industries.

Seventh, Shea asserts that "the Appellate Body must circulate its reports within 90 days of an appeal." Under DSU Article 17.5, the 90-day deadline is real. And it's true that the Appellate Body has in recent years often missed that deadline. But to assert that the Appellate Body is "disregarding" this clear timing rule is a false claim. A missed deadline by the Appellate Body is not an expression of its agency, but rather a manifestation of the principle of necessity. Every time it misses the 90-day deadline, the Appellate Body explains why in advance. The top reason has been the lack of judicial or staff resources.

Under WTO law, WTO members have an obligation to provide the Appellate Body "with appropriate administrative and legal support as it requires" (DSU Article 17.7 emphasis added) and to fill appellator vacancies "as they arise" (DSU Article 17.2) WTO Members have failed to fulfill those two key administrative obligations, and the Appellate Body should not be blamed for those failures.

During the past week in meetings in Washington, DC, I have heard it said several times that the Appellate Body is guilty of "overreaching" and that it is "exceeding its mandate." Such mantras are not true, no matter how often they are repeated. Since 1996, I have examined over 140 WTO Appellate Body decisions. I have discussed many of them in my classes and wrote commentary on more than I wish to remember. Sometimes by my lights, the Appellate Body gets its wrong. But like any independent international or domestic court, the Appellate Body is interpreting and enforcing the law as it sees it.

It's a myth that the Appellate Body is "overreaching", "coloring outside the lines", "exceeding its mandate" or any of the other similar criticisms being hurled at the Appellate Body by bullies who know that the Appellate Body will refrain from trying to defend itself.

I am happy to defend the Appellate Body. And WTO Member governments need to stand up to the Trump Administration and not cave into its efforts to crush the WTO compliance system.

This is a guest post from Ben Heath, Acting Assistant Professor of Lawyering at NYU Law

This is the fourth in a series of posts that reconstructs the theory of judicial stewardship embedded in the Russia — Transit panel report on the GATT security exception. In the first post, I described the stewardship function of international courts, which I suggested was exercised by establishing pathways for courts to receive political signals from states (embeddedness), and by developing flexible legal doctrines that a court can ratchet up or down in response to those signals (responsiveness). In the prior two posts, I showed how the panel created both the legal space and the factual basis necessary to conduct this stewardship function.

In this post, I argue that the panel’s interpretation of the Article XXI security exception reflects a flexible and politically sensitive approach to the trade/security boundary. This gloss is a bit different from the prevailing takes, which have so far focused on the nuts and bolts of the panel’s interpretation, and on passages that seem to tie Article XXI closely to classic notions of military and defense security. In my view, the panel has offered a framework for administering and adjusting the security exception over time to deal with twenty-first-century threats. The panel itself, as an ad hoc body, will not be able to administer this framework, but the vision is there to be picked up in future cases.

I. The Surface Reading: A Bifurcated Approach to Security Measures

The short explanation of the panel’s approach to the security exception is that it carved up Article XXI into subjective and objective elements. Article XXI provides, in relevant part:

Nothing in this Agreement shall be construed ...

(b) to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests

(i) relating to fissionable materials or the materials from which they are derived;

(ii) relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment;

(iii) taken in time of war or other emergency in international relations; …

On the panel’s interpretation, the bottom part of this provision — comprising subparagraphs (i) to (iii) — is objective and fully reviewable. The existence of a “war or other emergency in international relations,” for example, is an “an objective fact, subject to objective determination” by a WTO panel (¶ 7.77).

The chapeau part of Article XXI(b), however, is submitted to a far more deferential review, which borders on subjective. The panel decided that “it is left, in general, to every Member to define what it considers to be its essential security interests” (¶ 7.131). Moreover, in order to give effect to the term “it considers” in Article XXI(b), it was left to Russia, and not the panel, to determine “the ‘necessity’ of the measures for the protection of its essential security interests” (¶ 7.146). This largely subjective test is subject to the overarching requirement that states interpret and apply their treaty obligations in good faith, as reflected in Articles 26 and 31 of the Vienna Convention on the Law of Treaties (¶ 7.132).

This bifurcation is the headline, black-letter lesson to be drawn from the panel report. On this read, there’s a two-step approach to the security exception: one is fully reviewable by panels; and another is far more deferential, though not entirely capitulatory. As Mona Pinchus-Paulsen notes, this is a view with a long historical pedigree. But I don’t think it should be the last word on the panel’s interpretation.

II. A Deeper Reading: The Integrated, Sliding-Scale Approach

On second reading, it becomes clear that each step of the panel’s analysis weaves both objective and subjective elements, creating on the whole a far more flexible approach. For instance, the panel interprets “emergency in international relations” — a term that’s purportedly subject to objective determination — to mean a situation of: (i) armed conflict, (ii) latent armed conflict, (iii) “heightened tension or crisis,” or (iv) “general instability engulfing or surrounding a state” (¶¶ 7.76, 7.111). Although the first component — armed conflict — is an objective term in international law, (ii) through (iv) are highly malleable and undefined concepts.

In particular, the third type of emergency (“heightened tension or crisis”), if read broadly, is a tautology. It does little more than state that an emergency is a crisis. This reading is amplified in the Spanish and French versions of the report, which state that “una grave tensión internacional se refiere, por lo general, a una situación … de tensión o crisis agravada,” and that “grave tension internationale fasse référence généralement à une situation … de tension ou crise aggravée” (¶ 7.76). The panel’s approach may not be entirely open-ended: in dicta seemingly aimed at the United States, for example, the panel takes steps to choke off the ability of states to invoke mere “economic” disputes as justification for protectionist measures (see ¶¶ 7.75, 7.81). Even so, the equation of emergency with “crisis” would give future panels broad flexibility to deal with new kinds of threats and unforeseen scenarios.

The “subjective” aspect of the panel’s interpretation also contains objective elements. We are told, for example, that the principle of good faith requires member states to articulate the security interest to a sufficient level (¶¶ 7.134 — 7.135), and that the measures taken “meet a minimum requirement of plausibility in relation to the proffered essential security interests, i.e. that they are not implausible as measures protective of these interests” (¶ 7.138). The precise level of articulation and plausibility is not specified, and indeed might be deliberately kept variable, for future panels to adjust as appropriate in the circumstances.

This all comes together in the following paragraph:

7.135. What qualifies as a sufficient level of articulation will depend on the emergency in international relations at issue. In particular, the Panel considers that the less characteristic is the "emergency in international relations" invoked by the Member, i.e. the further it is removed from armed conflict, or a situation of breakdown of law and public order (whether in the invoking Member or in its immediate surroundings), the less obvious are the defence or military interests, or maintenance of law and public order interests, that can be generally expected to arise. In such cases, a Member would need to articulate its essential security interests with greater specificity than would be required when the emergency in international relations involved, for example, armed conflict.

This paragraph integrates every step of the tribunal’s analysis and weaves together both subjective and objective elements into an integrated sliding scale. This passage accepts implicitly that a state could invoke an emergency that is quite far “removed” from traditional situations of armed conflict or internal strife, and that a panel could nonetheless accept that emergency under the flexible definition adopted by the Russia – Transit report. But, in those circumstances, the future panel should require a more specific articulation of the “essential security interest” at stake, effectively ratcheting up the requirements of the good-faith principle. This will have further downstream effects, as a more precise articulation of the security interests would likely make it correspondingly harder to plausibly establish the measure’s necessity.

III. The Sliding Scale as Stewardship

This kind of sliding scale test is emblematic of a stewardship function. This kind of test allows a panel or the AB to adapt the rules to new circumstances, ensuring that they remain relevant to managing future policies that are triggered by as-yet-unknown developments. But the panel also asserts the authority to come back and re-strike the balance between deference and supervision in light of these developments — either by adjusting that balance in favor of member state discretion, or toward greater international supervision. This is neither deference nor intrusiveness: it is a dynamic approach that is capable of moving between either pole as the court deems appropriate.

Some close readers of the Russia – Transit report may note a small irony here. The panel had to adopt something like the sliding-scale test in 7.135 if it was to rule for Russia, because (as I noted in Part III) Russia did very little to articulate its precise security interests here. So the panel needed some justification for saying that, since this emergency was rather close to armed conflict, there was no need to demand much more articulation from Russia (see ¶ 7.136). In other words, there may have been some outcome-driven reasons for the panel to announce this test. Nevertheless, the effect of this test, if adopted, is to place the dispute settlement system in something like a forward-looking stewardship role.

Finally, it should be stressed that this is just a roadmap for the stewardship role in international trade. This is only one panel, which will have no continued existence beyond the instant dispute. It will be up to other panels, to the WTO Appellate Body, or to other international economic institutions, to decide whether to adopt the approach outlined by the panel in this case, and how to implement it going forward. My final post will discuss the implications of this for both trade and investment.

A striking feature of the debates over ISDS reform in the last UNCITRAL session were the battles over naming and framing. In some ways, these battles reflect the power that names and frames have in shaping our understanding of reality, guiding and limiting debates, and making some approaches or positions seem more obvious or appealing than others. In another way, these debates often represented proxy battles for deeper, substantive divisions among various states of the type we addressed in our previous blog on the Divided West and the Battle for and by the Rest.

What is in a name? Does framing matter?

When we imagine negotiations between governments, we often picture hard bargaining over bracketed text. In reality, the early stages of negotiation are often more about framing, particularly when negotiations deal with new issues or evolving processes. Framing plays a crucial role in creating the conceptual categories through which participants understand dynamics and formulate or communicate their positions. Every frame simultaneously reveals and obscures, both providing insights and limiting vision.

Naming is important because the names attached to positions can be relatively neutral or can be designed to make some positions seem more attractive or inevitable than others. Actors can attempt to use names dispassionately to describe situations or as advocacy tools to support particular positions. Sometimes it is not clear which is being done. Sometimes different actors can be using the same names in different ways.

Names and frames are often in flux during negotiations. Particularly in a consensus driven negotiation, we should expect naming and framing to shift over time in order to forge consensus among disparate groups. Heated debates in the UNCITRAL ISDS reform process over the use of the names “incremental” and “systemic” provide a good illustration of these phenomena.

Academic naming and framing

Not all states think alike when it comes to ISDS reform. From an academic perspective, it is helpful to sketch some of the initial camps that have developed with respect to ISDS reforms. Although not all states have determined their positions with respect to ISDS reforms, states that have declared a preference typically cluster around three ideal types, which one of us has previously described as incrementalists, systemic reformers, and paradigm-shifters.

On this framing, incrementalists believe that international investment arbitration should be retained even if it is subject to various targeted reforms; systemic reformers accept that international claims by investors should remain but think they should be handled by a new institutional arrangement, like an international court and appellate body; and paradigm-shifters think the whole regime should be up ended because investors should not be permitted to bring direct claims before international tribunals, whether judicial or arbitral.

Of course, positions within any of these camps are not uniform, nor are the camps the only options available. It would be possible to develop alternative camps or ones between particular poles. States might, for instance, come to support semi-systemic reforms like the introduction of an appellate body over investor-state arbitration for example. Some states might switch camps or have different treaties with different treaty parties that reflect different positions. But this typology provides a way to sketch out the general lay of the land by identifying its outermost poles.

This nomenclature was chosen to be as value-neutral as possible – incremental reformers instead of loyalists, paradigm-shifters instead of revolutionaries or transformational reformers – after discussion with many actors involved in the process to ensure that the names reflected positions as fairly and accurately as possible. But no naming can ever be entirely neutral. Different conceptualisations reveal certain elements while obscuring others. Underlying realities may also shift in a way that makes particular naming inadequate to describe evolving positions or politically charged. These names proved to be a case in point.

Evolving concerns

Early on in the UNCITRAL process, some of the states in the incrementalist camp had no objection to be referred to as incremental reformers. They argued that many of the concerns about investor-state arbitration were overblown or had been and could be significantly addressed through targeted reforms on a bilateral or multilateral basis. They supported “evolution” not “revolution,” pointing out the dangers of jettisoning some of the benefits they perceived of the existing system, such as flexibility and depoliticisation. However, as the UNCITRAL debates evolved, these states became less and less comfortable with the label “incremental reformers” for four reasons.

The first reason had to do with what the names revealed and obscured in terms of the reforms and their effects. The naming focused on the natureof the reforms, not their effects. The framing asked were the reforms suggested incremental (small in scale) or systemic (larger in scale)?But this was inadequate to capture some of what these reformers thought they were doing. It was possible, they pointed out, to have incremental or targeted reforms that had significant effects. Similarly, we would observe that it is possible to have systemic reforms that might have only incremental effects, as many NGOs would argue with respect to the proposed Multilateral Investment Court. So, it is important to think about the issue of scale or extent with respect to both the nature of reforms and their effects.**

The second reason had to do with evolving state positions within the room. In Vienna 2018, more states started using the word “systemic” when describing the nature of their concerns about the investment treaty system. This usage created two problems from the perspective of the camp associated with incrementalism. First, as more states voiced systemic concerns about investor-state arbitration, it became harder for this camp to sell “incremental” reforms as a sufficient response to the perceived seriousness of the objections being raised. Second, this language could mistakenly give the impression that states voicing systemic concerns were supporting the multilateral investment court, which was not necessarily the case.

Overt politicisation

The third reason became stark in New York in 2019: these names were deployed in a highly politicised way. This overt politicisation began on day one when Mauritius attempted to set the scene for the delegates (particularly new ones) of the Working Group.

“There is a small group of states that have made it clear that they do not want for this work to take place at all,” Mauritius explained. Their position had evolved over time. First, they argued that there were no concerns. When that didn’t work, they next argued that even if there were concerns, there was no need for reforms. Now, they have to accept there are concerns but they argue that “there is no need for systemic reform and that we should work only or as a matter of priority on so-called incremental reform.” Their aim, he said, was delay: “the implication is … let us please work as slowly as possible on that so that if we ever get to systemic reform our children will be dealing with it rather than us.”

Mauritius had nothing against soft law reforms, the delegate explained, but thought that the substance of systemic reform needed to be considered: the “one type of reform that would most comprehensively address the concerns that we have identified is systemic reform.” There was no objective reason for some states to “block work” on such reform. “We are not proposing that anything be rushed,” he claimed, but “we will oppose and we do hope that the group as a whole will oppose attempts to filibuster.” The simplest approach, he suggested, was to have two streams – one working on soft law and the other on a court and appellate body. “That is a reasonable solution and we do hope that everyone will be approaching this exercise as you put it in good faith.”

Mauritius had done multiple things in its framing. It reduced the three main camps into a single binary – incrementalists versus systemic reformers. It suggested that two options – soft law and work on a court proposal – represented a sharp and exclusive dichotomy, rather than being outer poles along a gradual continuum of reform options, some of which could be overlapping. It suggested that some states were not really interested in actual reform and were using discussion of incremental options as a way to stall or stymie the consideration of systemic reforms that were wanted by a majority of states. And it suggested a two-track solution was the only reasonable way to avoid bad faith delaying tactics. Incrementalism was thus equated with inadequate reforms and obstructionist motives.

The pressure built on Tuesday. Germany explained that it had high expectations for ambitious, systemic reforms. That did not stop an a la carte approach with a menu of reforms. But the incrementalists should not be able to “block” the approach of those who want broader reform. Don’t “fall in the traps laid out so skilfully here,” the delegate warned. “We have to seize this once in a lifetime opportunity” to effect systemic reforms no matter how daunting and “not yield to those who [are] thinking small.” Mauritius chimed in again too expressing the hope that the call to work on aspects that can inspire maximum consensus was not a “veiled threat” to block work on other aspects, such as a court.

Political consequences

The fourth reason was that the language became more consequential on Wednesday when the Swiss delegation proposed a two-track working plan where one track would focus on “incremental reforms” (such as a code of conduct, third party funding etc) and the other on “systemic reforms” (mainly a court and appellate body). Whether to divide the work into two work plans was the most controversial issue of the week. Now these two workplans had names attached to them – incremental and systemic – and so a debate that was already highly divisive came to be fought through terminology that had become increasingly politicised.

Mexico objected that the term “systemic” could mean different things to different actors. Russia spoke about the ethics of how the Working Group functions, reminding delegates that “Everybody here works in good conscience” and requesting some members of the working group to “refrain from excessive language.” The Russian delegate objected to the framing that what was needed was the creation of a tribunal and that anyone who didn’t agree was accused of not being constructive or of not acting in good conscience. Chile called on the Working Group not to use the labels incremental and systemic or to create “imaginary blocks against each other.” Chile did not want the paper it submitted with other states to be viewed or labelled as incrementalist, reiterating that it was “fully committed to reform” – “substantial and meaningful reform and not cosmetic or minor changes or tweaks to the system” as some had suggested.

Against these positions, many other states took the floor to argue in favour of the dual work plan, pushing that the Working Group had to deal with all reform options, including incremental and systemic reforms. But these terms were also being used in a new setting and the fit was awkward. Some of the reforms that might be developed on the “incremental” track, such as a code of conduct or rules on third party funding, might also apply in whole or in part to any court developed under the “systemic” track. How should these cross-cutting issues be treated? If these were lanes on a highway, how many were there, did they intersect and could you switch lanes? And what about other reforms that were different in kind, like the creation of an advisory centre? Where did they fit?

A Compromise Solution

In a consensus-based forum, these sorts of stand-offs have to be resolved. Here, the most important issue was whether to have a work plan that was sequential (starting with more modest reforms with a higher degree of consensus) or concurrent (including work on more ambitious but more divisive reforms, such as a court) and, if concurrent, how the time should be divided among different reform proposals. In reaching agreement on this controversial issue, it was important to step away from the language of incremental and systemic reform because it had become polarising.

The European Union made the first overture to this effect. The two tracks were not fixed lanes and certain issues could change lanes. Although the incremental and systemic terminology might be useful in general terms to describe some of the discussions in the group, the Union did not think that it was appropriate for naming the two workstreams. Perhaps the workstreams should be referred to as “rules, principles, guidance” and “mechanisms” instead. The United States welcomed this intervention. In the same spirit, the United States suggested that the two sorts of reform archetypes might be better understood through the nomenclature “functional and structural.”

Overnight, a compromise was worked out as described in a previous blog and in IA Reporter. The Working Group would not label the reform types incremental and systemic, but it recognised that there were fundamental differences in some of the reforms being proposed. Some were more structural in nature, others involved reforms within the current system (the parties couldn’t agree on what to call these!), and some straddled the line between the two. The key was that multiple potential reform solutions would be developed simultaneously. One reform option that would move forward at the start was how to develop structural reforms. There would also be discussion of which other solutions would be considered and how many could be developed at once, taking into consideration issues such as capacity.

Lessons learned

We take away four key lessons from this experience:

Naming and framing matters. Names and frames are useful for communicating and clarifying debates and possible options for moving forward. Yet names and frames also shape how participants inside the room understand the debates and communicate their positions. We should expect names and frames to be contested during negotiations, as states claim or reject terminology to achieve their negotiating ends. Every naming/framing reveals and obscures, even relatively neutral terminology can come to take on toxic connotations, and new wording will give rise to new debates. For instance, does the new framing of “structural” reforms instead of “systemic” ones create problems for NGOs that wish to widen the terms of the existing debates to consider more substantive issues?

Academic framing not advocacy positions or anodyne descriptions. Despite sometimes leading to controversy, we will continue to name and frame the debates and positions as we see them emerging. Our aim is to describe what is going on and offer first-cut conceptualisations; ours is an academic exercise, but one that is happening in real time. We test our framing with diverse participants within the process to check that it has some level of resonance across the room. We aim to give a genuine sense of disagreements and the divisions, not a sanitised or anodyne one. It is not our aim to function like the official UN reports where references to controversies are frequently eliminated (as was the case here where references to “incrementalism” were deleted on Russia’s request).

Naming/framing and debating/compromising will be an iterative dynamic. Names and frames are likely to change numerous times over the course of these negotiations. Doing history in real time means that we will suggest names and frames and others will contest and stress test them – showing what they reveal and obscure and where they have pitfalls. We should not be surprised when particular participants invoke these terms for political ends or if they develop connotations we did not initially anticipate. When a particular name/frame becomes a paralysing division within the group, we should also expect the Chair will seek to move past existing formulations and language to broker a compromise position. Naming and framing will thus be an iterative process.

Sometimes the names change, but the positions remain the same. In all these debates over names, did the underlying positions shift? Not really. As naming and framing is an iterative process, it is a bit like a snake has shed its last skin but it still a snake. There are still states that support at most targeted reforms to investor-state arbitration, others that are pushing for a court, some that may be open to some sort of mixture, and others who question the need for arbitration or an international court. But the change of names is still significant and telling in two ways:

No one wants to be an incremental reformer anymore. It is clear that many states have serious, systemic concerns about investor-state arbitration. Given the politics, every side now will clamour to be understood as representing systemic reforms to systemic problems. We are all systemic reformers now.

There will be a heightened sensitivity in the room to the possibility of, and accusations about, obstructionism. Those states that favour reforming but ultimately keeping investor-state arbitration are sensitive to the accusation of obstructionism, which may affect their strategies going forward.

*Anthea Roberts attends UNCITRAL Working Group III as part of the Australian delegation but she acts and writes in her independent academic capacity. Taylor St John attends UNCITRAL as an observer from PluriCourts, University of Oslo.

**We are grateful to Jorge Vinueles for making this distinction between incremental and systemic reforms and effects in his presentation at the Latin American Society of International Law conference in 2018.

The United States has put forward a proposal for the recently launched e-commerce talks at the WTO. Bloomberg's Bryce Baschuk broke the news (and uploaded the document), noting there are many similarities to the U.S.-Mexico-Canada Agreement (USMCA) Digital Trade Chapter (19). He's right. A lot of the proposal appears to be a copy and paste of what's in the USMCA text, including provisions borrowed from the Financial Services Chapter (17). But there are a few discrepancies, some minor, others perhaps a little more substantive. Here's a run down of all the differences:

There's a new definition in the proposal that doesn't appear in USMCA: "electronic transmission or transmitted electronically." There are also two definitions from the USMCA that don't appear in the proposal, "trade administration document" and "unsolicited electronic communication." In terms of the text of the definitions, the definition for "digital product" omits the clarifying phrase "For greater certainty" from the second sentence.

Article 2 (Scope and General Provisions) omits the introductory language of article 19.2.1 from USMCA, which reads:

The Parties recognize the economic growth and opportunities provided by digital trade and the importance of frameworks that promote consumer confidence in digital trade and of avoiding unnecessary barriers to its use and development.

Article 2.2(b) is new:

2. This Agreement does not apply:

...

(b) to a service supplied in exercise of governmental authority; or

...

Article 3 (Customs Duties) has some small tweaks as well. It reads "No party shall impose customs duties on electronic transmissions, including content transmitted electronically, between a person of one Party and a person of another Party." In comparison the USMCA text reads:

Article 19.3: Customs Duties

1. No Party shall impose customs duties, fees, or other charges on or in connection with the importation or exportation of digital products transmitted electronically, between a person of one Party and a person of another Party.

2. For greater certainty, paragraph 1 does not preclude a Party from imposing internal taxes, fees, or other charges on a digital product transmitted electronically, provided that those taxes, fees, or charges are imposed in a manner consistent with this Agreement.

As you can see, there's a slight change in language to the first provision. The second provision is completely omitted from the WTO proposal, though it's not clear that keeping it in would really add any clarity.

Article 7 reads mostly like USMCA Article 19.8, with a few minor changes. First, the introductory language of that article in the USMCA is again removed:

1. The Parties recognize the economic and social benefits of protecting the personal information of users of digital trade and the contribution that this makes to enhancing consumerconfidence in digital trade.

Second, Article 4 incorporates the second sentence from Article 19.8.3, but omits the first sentence entirely, which reads (the italicized is the language copied over):

3. The Parties recognize that pursuant to paragraph 2, key principles include: limitation on collection; choice; data quality; purpose specification; use limitation; security safeguards; transparency; individual participation; and accountability. The Parties also recognize the importance of ensuring compliance with measures to protect personal information and ensuring that any restrictions on cross-border flows of personal information are necessary and proportionate to the risks presented.

Finally, there's a complete omission from the WTO proposal of online consumer protection, found in USMCA Article 19.7:

Article 19.7: Online Consumer Protection

1. The Parties recognize the importance of adopting and maintaining transparent and effective measures to protect consumers from fraudulent or deceptive commercial activities as referred to in Article 21.4.2 (Consumer Protection) when they engage in digital trade.

2. Each Party shall adopt or maintain consumer protection laws to proscribe fraudulent and deceptive commercial activities that cause harm or potential harm to consumers engaged in online commercial activities.

3. The Parties recognize the importance of, and public interest in, cooperation between their respective national consumer protection agencies or other relevant bodies on activities related to cross-border digital trade in order to enhance consumer welfare. To this end, the Parties affirm that cooperation under paragraphs 21.4.3 through 21.4.5 (Consumer Protection) includes cooperation with respect to online commercial activities.

This is the only omission that really left me scratching my head (though the omission of USMCA Article 19.13 (Unsolicited Commercial Electronic Communications) is also notable). Some language on consumer protection appears in the EU proposal, with Article 2.3.2 standing out:

2.3 CONSUMER PROTECTION

1. Recognising the importance of enhancing consumer trust in electronic commerce, Members shall adopt and maintain measures that protect consumers from fraudulent and deceptive commercial practices when they engage in electronic commerce transactions.

2. Additionally, Members should consider adopting or maintaining measures that:(a) require traders to act in good faith;(b) require traders to provide accurate information on the goods or services and the terms of the contract; and(c) grant consumers access to redress.

3. Members recognise the importance of cooperation between their consumer protection agencies or other relevant bodies in order to protect consumers and enhance online consumer trust.

In a way it seems odd that the U.S. would not put forward its own language on this given that the USMCA text seems substantively different than the EU proposal. It will be interesting to see how this develops.

Other USMCA provisions left out include: Article 19.9 (Paperless Trading), Article 19.10 (Principles on Access to and Use of the Internet for Digital Trade), and Article 19.14 (Cooperation). These include best endeavor clauses, though of course, they might come up in the course of plurilateral discussions.

While a detailed examination of all proposals, as they come in, will be useful, just looking at the U.S. proposal helps us to evaluate the consistency of U.S. policy in this area. What it reveals is that USMCA, while substantially borrowing from CPTPP, is a template that we will likely see employed in other negotiations, with minor adjustments here and there to suit the specific context. Therefore, even if USMCA never gets ratified, parts of it may live on in other texts. Given the amount of time and energy that was expended on negotiating the agreement, it is not surprising that this would be the case. With regard to the e-commerce talks, however, we have yet to see how far the U.S. is willing to move from its position, but looking at the omissions in comparison to the USMCA may be a good indicator of how little room there is to move.

While the panel report in Russia – Measures Concerning Traffic in Transit (DS512) is best known for its interpretation of Article XXI of GATT 1994, the report also contains an important ruling relating to transparency in WTO dispute settlement. In this dispute, the EU published its third-party submission on the EU Commission’s website. The Russian Federation objected that, in so doing, the EU breached its confidentiality obligations under Article 18.2 of the DSU by revealing, inter alia, Russia’s “positions” (i.e., its legal arguments).

The panel disagreed with Russia, noting that “We …do not consider that the legal arguments, positions and opinions of parties in WTO dispute settlement are … capable of designation as confidential information” (para. 5.14). The panel emphasized that to treat legal arguments as confidential would undermine the right of a party under Article 18.2 to “disclose statements of its own positions to the public”.

This ruling of course endorses the right of parties and third parties to publish their WTO dispute settlement submissions, without needing to edit them to hide the legal arguments of the other parties. But the panel’s ruling has potential implications beyond that issue. For example, a major impediment to partial open hearings (i.e., hearings where one party’s oral statement is public, while the other party’s is not), has been the perceived need to allow review of the public oral statement in order to redact elements that reveal the other party’s legal positions. This proved in the US-Tuna dispute to be a burdensome process. The logic of the Transit case implies that any need for redaction would be limited to specific information that was designated as confidential.

This is a guest post from Ben Heath, Acting Assistant Professor of Lawyering at NYU Law

This series reconstructs the idea that the Russia — Transit panel report on the GATT security exception was a “constitutional moment” for the WTO. In the first post, I introduced the idea that the report envisions that future panels and the Appellate Body will perform a “stewardship function” with respect to the trade/security boundary. In Parts II and III of this series, I identify two critical moves made in the panel report, which are essential preconditions to asserting this kind of function. Yesterday, I argued that the panel’s controversial decision to avoid saddling Russia with responsibility for precipitating the Ukraine crisis was the first step in developing this stewardship function.

In this post, I focus on the panel’s second move in its assertion of a stewardship role over security matters, which was to aggressively assert its authority to find and characterize the relevant facts. In establishing an “emergency in international relations,” the Russia — Transit panel took a series of steps that purported to maximize its own powers as a factfinder and establish its relative autonomy from the parties’ own cramped litigation strategies. These steps had the effect of further consolidating the panel’s authority to interpret the politically sensitive provisions of GATT Article XXI, as well as to develop the factual record on highly contentious political matters.

I. An Open Secret

As the Russia — Transit panel recites the parties’ exchanges on the application of Article XXI (¶¶ 7.111 — 7.119), one gets a sense of barely concealed frustration. It began with Russia’s first written submission, in which Russia explained that it did not want to present any details regarding the “emergency in international relations” that it claimed existed between itself and Ukraine (¶ 7.112). Ukraine responded in kind, asserting that it was “left in the dark” about what the emergency in this case really was (n.192).

Once the case moved to oral hearings, this reticence from both parties took on an element of theater. Russia posed to the panel a “hypothetical question”: suppose that there is internal unrest within a country bordering a WTO member; this unrest occurs near the border; the neighboring country loses control over that border; refugees begin moving into the member’s territory; and the neighbor and/or third countries impose sanctions against the member that are not authorized by the United Nations. Would that situation, Russia asked, amount to an “emergency in international relations”? (¶ 7.114). When asked by the panel how closely its hypothetical mirrored real life, Russia demurred (¶ 7.115).

Russia then referred the panel to a report prepared by Ukraine for its 2016 Trade Policy Review (TPR) at the WTO. This report, Russia said, explained in Ukraine's own words “what is going on and how real these whole hypothetical questions are” (¶ 7.115). This report stated that Ukraine’s economic performance in 2014–2015 had been adversely affected by “the military conflict in the east,” and by “the annexation” of the Crimea. It appears that this reference to Ukraine’s TPR was as clear and explicit as Russia’s deliberately mysterious litigation strategy was willing to get.

This put the panel in a difficult position. It was clear that no one was really “in the dark” about what was going on: the situation between Russia and Ukraine had since 2014 been a high-profile clash marked by the outbreak of violence, invasion and purported annexation of one party’s territory by another, and the widespread condemnation of third-party states, including with the imposition of economic sanctions. But the panel was not being given these facts to work with.

II. The Panel’s Decision

The panel decided that, notwithstanding the obfuscation, Russia had given it enough information to find that an emergency in international relations did exist as of 2014. It did so over the objections of Ukraine and against the arguments of some third parties, including the EU, which had argued that the defense could be rejected simply by virtue of Russia’s failure to meet its burden. In reaching this result, the panel took four steps that increasingly pushed the boundaries of a panel’s factfinding authority in these circumstances.

First, the panel deliberately avoided assigning the burden of proof to Russia, or saying anything at all about respective burdens. In GATT Article XX jurisprudence, the burden of establishing an affirmative defense generally rests on the party asserting it (see, e.g., US — Wool Shirts and Blouses, at 14). But the panel had decided that Article XXI had a “different character” from that of Article XX (¶ 7.98(a)), perhaps suggesting it was not necessarily subject to the same analysis. By avoiding any assignment of the legal burden here, the panel attempts to head off the charge that its subsequent efforts to characterize the emergency are ultra vires.

Second, the panel wrung every fact it could from Russia’s own representations. Although Russia had said very little about the purported emergency, it had stated that the emergency involved Ukraine, given some sense of the timeframe, and indicated that the emergency was publicly known. The panel made maximum use of each point (see ¶ 7.112, 7.119).

Third, the panel accepted Russia’s invitation to rely on Ukraine’s TPR report (¶ 7.118). This was not straightforward, since the Trade Policy Review Mechanism itself states that the reports are not “intended to serve as a basis for the enforcement of specific obligations under the Agreements or for dispute settlement procedures.” Historically, panels have declined to attach any importance to panel reports or to take them into account in the context of dispute settlement, and the Appellate Body in US/Canada – Continued Suspension has warned of actions that would have a “chilling effect” on statements in DSB meetings, committee meetings, or the TPRM. (One panel report, however, has used TPRM discussions to determine whether certain measures can fall under the “public morals” exception – see US – Gambling, para 6.471.) Despite these warnings, the panel found that it could use the reports to further identify the factual situation, so long as it was not using them to determine legal liability. In making this fine distinction, the panel appears to have been pushing the boundaries with respect to its factfinding authority.

Fourth, to fill in any gaps in the record, the panel reached outside the WTO to refer to certain General Assembly Resolutions that had been placed in the record by Ukraine. These resolutions referred explicitly to the “territorial integrity” of Ukraine, to Russia’s obligations regarding the use of force under Article 2 of the UN Charter, to the “temporary occupation” and purported “annexation” of the Crimea and the city of Sevastopol, and to Russia’s obligations under the Fourth Geneva Convention as an “occupying power.” (¶ 7.8). These references ultimately proved critical in the panel’s finding that the situation between Russia and Ukraine as involving “armed conflict,” and therefore as an emergency in international relations (¶¶ 7.122 — 7.123). This then set the stage for the panel’s ultimate finding that Russia had properly invoked the security exception.

III. Stewardship and Factfinding

The panel’s approach to the existence of an emergency, in my view, reflects an aggressive move. This is not to say that panels don’t ordinarily have broad factfinding authority to seek information relevant to the dispute; Article 13 of the DSU strongly indicates that they do. But in this particular context the panel’s ordinary authority was, or could have been, limited by: the parties’ respective burdens and their own refusal to adduce evidence on the security situation; GATT Article XXI(a), which entitles a party to withhold information on essential-security grounds; the specific principles and jurisprudence around TPRM reports; and the panel’s own decision to avoid passing upon the parties’ respective international responsibility or the legal character of the situation between Russia and Ukraine.

It would be tempting to read the panel’s decision, which maneuvers around all of these limitations, as bending over backwards to accommodate Russia’s strategy of maximum mysteriousness. But there are at least three reasons not to treat this simply as a deferential move.

First, here we see the panel pushing the outer boundaries of its factfinding powers in a case with huge systemic implications and deep political sensitivities. The panel’s recourse to Ukraine’s TPR reports is, as noted above, potentially pushing the boundaries of what should be acceptable according to the rules and prior cases. The recourse to General Assembly resolutions—contested ones, at that—to fill in the factual record is itself striking and, in the context, significantly widened the universe of available factual material.

Second, by using these materials, and in particular the UNGA resolutions, the panel uses for its factual analysis the very materials that it said were irrelevant to its legal conclusions. These resolutions are replete with references to concepts from the law of war, and they at least raise serious concerns as to the legality of Russia’s actions. By holding itself open to these materials as matters of fact, the panel is refusing to allow its jurisdictional limitations to affect its interpretation and application of the security exception. At the same time, the panel is, at least formally, insisting that it is not relying on or confirming the legal conclusions of these other bodies, though its statement in paragraph 7.122 that the situation between Russia and Ukraine “involv[es] armed conflict” may cross this boundary.

Third, and finally, the panel is asserting its relative autonomy vis-à-vis the parties to the dispute. Notably, both Russia and Ukraine offered the panel a way out of the case whereby it could avoid issuing an authoritative statement on what “emergency in international relations” means: it could either have declared the whole provision self-judging (Russia’s preference), or found that Russia had not sufficiently articulated the facts underlying its security defense (Ukraine’s argument). The parties, further, made it tempting to take one of these offramps, given their own tight-lipped approach to what the emergency really was. The panel nonetheless rejected both approaches, suggesting for future cases that the parties cannot avoid the interpretation of a sensitive treaty provision simply through clever pleading.

For these reasons, this was a strong move, which can’t be easily be described as deferential to Russia’s case. Indeed, the United States in its comments on the report has already singled out this element of the panel’s decision for criticism. Together with its first move, the panel has created the legal space and the factual basis for announcing a flexible and politically sensitive test for the application of the security exception, which envisions the WTO disputes system as a steward of the institution. This flexible test will be the subject of my next post.

This is from a Vox interview by Zack Beauchamp with Ganesh Sitaraman, a professor at Vanderbilt and "a longtime adviser to Sen. Elizabeth Warren (D-MA)":

Zack Beauchamp

Would you say that, broadly speaking, a progressive foreign policy is critical of free trade as an idea, maybe even open to the kind of tariffs that Trump has been willing to employ?

Ganesh Sitaraman

I think it’s the wrong binary to talk about free trade or protectionism. No one believes in either purely free trade or pure protectionism. And we know that because we have economic sanctions on various countries that lots of people support. Those are restraints on trade, and that’s well understood to be an appropriate tool that we use in our foreign policy and national security policy.

I think the way to think about it is when and with whom are we trading? In what ways and how are we building the rules around trade?

And I think that’s a place where progressives have a different view to where a lot of the consensus has been over the last generation, which I think is a little bit more concerned with concluding trade agreements and a little bit less concerned with what the distributional consequences of those trade agreements might be.

There was also this:

A second thing that I think we see is an interest in what I’ve called selective disentanglement. The idea here is that in areas of critical national security importance, we should think about having domestic capacity to be able to produce those goods or services.

It worries me that when asked directly about tariffs, he did not say what he thought of tariffs, and talked about "when and with whom are we trading" as the real question. My answer would be, as much as possible and with as many countries as possible. His answer seems likely to be different. And his approach to "national security" might not be very different from the current Trump administration Section 232 policies.

The UNCITRAL debates over ISDS reforms can serve as a real-world laboratory for observing changes in the national interests and policies of different countries, as well as shifts in their geopolitical weight and alignments. As part of a commitment to transparency, UNCITRAL decided to allow a wide range of observers in the room and to make recordings of the debates available. Such transparency gives non-state actors a chance to analyse these dynamics in real time and to consider not only what they mean for ISDS reforms but how they reflect and reinforce broader shifts in international economic governance. During the latest Working Group III meeting in April in New York, we observed a divided West and an emerging battle by and for the Rest.

The Divided West

The ISDS reform debates reached UNCITRAL despite a division within ‘the West.’ For multiple reasons, most notably that ad hoc investor-state arbitration had become politically toxic within Europe as a form of ‘private justice,’ the European Union proposed the creation of a multilateral investment court. Although initially reluctant to bring these issues to UNCITRAL, the European Union and Canada ultimately supported these reform debates going forward within a multilateral UN body. Other significant powers, including the United States and Japan, were opposed to both the creation of a court and these reform debates going forward in UNCITRAL.

As in other fora, like debates over the WTO Appellate Body crisis, the European Union is championing multilateral dispute resolution, whereas the United States is demonstrating scepticism. The United States and some others also objected to pursuing the discussions at UNCITRAL due in part to how its decisions are reached. UNCITRAL almost always operates by consensus. But if an issue is forced to the vote, only the 60 elected member states are able to vote. Currently the European Union holds 12 of these votes. Those who oppose the EU’s court agenda are concerned that, if the issue comes to a vote, there is little they could do to stop a court from being created.

The West’s division has given rise to a tug-of-war dynamic. The European Union wanted to continue the ISDS reform debates in UNCITRAL and it has a clear and declared preference for the reform it ultimately wants to see adopted. The United States and Japan did not want the debates to be held in UNCITRAL. Having lost that battle, they and others, like Chile and Russia, arguably have an incentive to slow down the reform debates and to support the development of alternative reforms in UNCITRAL and elsewhere that might convince third states to accept an improved version of the existing system rather than trade it in for a new court model. In their telling, states have already been addressing some of the problems with ISDS through their bilateral and plurilateral treaties, including the recent CPTPP and USMCA; why not wait to see if these reforms are effective before embarking on a court proposal?

Many of the UNCITRAL debates so far have been marked by these pull-and-drag forces. Thus, for instance, should UNCITRAL request extra funding for additional meetings on ISDS reform? If you are a ‘puller,’ the answer is usually yes – there is a lot to do and we need to move forward to do it. If you are a ‘dragger,’ the answer is typically no – there is no need to sacrifice additional time and resources at this stage of the reform debates. The risk for the pullers is looking inflexible, as though determined to pursue their preferred option without listening to or accommodating others. The risk for the draggers is looking obstructionist, as frustrating the desire of other states for reform. Yet once the debates move to concrete reform proposals, this dynamic might shift again, with different states championing different procedural reform options in something more akin to a competitive race.

What of the Rest?

Power in international economic governance used to be primarily held by the G7 – Canada, France, Germany, Italy, Japan, the United Kingdom and the United States – or by the ‘Quad’ in WTO-speak – the United States, the European Union, Japan and Canada. Until the mid-1990s, these major economies, which comprised the four largest in the world and represented a majority of the world’s economic output, were the major decision-makers. If they agreed on the terms of a deal, others typically fell into line. Although many states were represented in plenary meetings in various international organisations, these key players were typically the ones who participated in the smaller scrum or side games where deals were cut. Susan Block-Lieb and Terrance Halliday also found this dynamic in earlier UNCITRAL Working Groups; a core group of around 10 states dominated decision-making.

But we no longer live in a G7 world. The developed world’s share of the global economy has been shrinking and that of the developing world has been rising. Some developing economies are now among the largest economies in the world, including China and India. Consensus agreements can no longer be hammered out by the Quad and accepted by the rest, as evidenced by the failure of the Doha round at the WTO. Although true in general, this change holds particularly true when the major Western economies are divided, as they are with respect to ISDS reforms and WTO dispute resolution. Any attempt to develop consensus requires new alliances to be formed with states formerly excluded from this inner sanctum, including Argentina, Brazil, China, India, Russia and South Africa. The movement from the G7 to the G20 illustrates this shift.

This shift is evident in Working Group III. An ‘inclusive process’ has become a catchphrase. Several real benefits can be gained from an inclusive process. First, the states that know investor-state arbitration best are often those that have faced many claims or mega-claims. Other states have much to learn from these states. The active engagement of Argentina in this process provides a good example. By contrast, when experts-designate from Argentina, Brazil, and India raised concerns during the drafting of the ICSID Convention, those concerns were brushed aside by European and American governments who didn’t think they would ever be respondents.Today, in contrast, all governments know they are (or may also be) respondents.

Second, ISDS suffers a ‘fundamental lack of trust by the public’, in the words of Cecilia Malmström, and regaining public trust requires a more inclusive, more transparent, and thus more legitimate process. The European Union, Germany and Switzerland have replenished a travel fund administered by UNCITRAL to enable representatives from developing states to attend the meetings. IISD and CCSI, influential NGOs that have relationships with developing country officials, have helped facilitate the participation of those countries. The result has been impressive. The number of states participating in each meeting has continued to increase, reaching 116 in New York. Many developing states are actively taking part in the debates. Some, like Costa Rica, Morocco and Thailand, have made detailed and thoughtful submissions. Multiple African states took the floor for the first time. Whatever emerges from this UNCITRAL process will come to a vote in the UN General Assembly – an outcome with powerful resonance and symbolic legitimacy, particularly for developing states.

Developing States as Pawns and Players

Inclusivity is also appealing for strategic reasons. The European Union is presumably betting that many developing states have compelling concerns about ISDS and might be persuaded to join its reform proposal. Their attendance in the plenary room helps to diminish the counterweight of the United States and its allies. The first part of that bet is proving correct; many developing states do have serious concerns about ISDS. The second part of the bet is riskier; whether these states would line up behind an eventual court is less clear, though they might be tempted to by various incentives (like an advisory centre).

The counter grouping also made strategic references to inclusivity, but arguably with less success. In opposing an additional week of Working Group meetings, for instance, Russia and Japan explained that such an addition would create a problem of capacity, particularly for developing states that might lack the time and resources to attend. These statements led to clear pushback from several developing states, including Malaysia and Argentina, which reminded the group that most developing states had spoken in favour of the extra time. The implication was hard to miss: developing states were in the room – and in large numbers because this issue concerns them – and they were perfectly capable of speaking for themselves.

Capacity remains an issue. For example, turning up is one thing, but turning up consistently is another. This problem applies to both states and the individuals chosen to represent them; many networks are developed personally on an iterative basis, so repeat play is key. Sending a generalist to the meetings from the local embassy is also different to sending an expert in the subject matter from the capital. The question of which department is represented from capital is also an issue: the one that negotiates the treaties or the one that defends claims? Well-resourced delegations often send both, but that is not an option for many developing states. The presence of 116 states does not mean that all of them are likely to be actively involved in the formulation of reforms and compromise deals.

Nevertheless, as the positions of the key developed states are currently clear and divided, the real battle is going to be over what ‘the Rest’ decide to support. Non-Western and developing states are and should be key players in this debate. To work out and influence their positions, Western states probably need to pay less attention to battling each other and more attention to building alliances with third states. It remains to be seen whether the African group or other groups that operate in the WTO will form or if any states will emerge as spokespersons for larger groups.

Tension with UNCITRAL working processes

This development is likely to produce tensions with respect to UNCITRAL’s usual working processes. Although UNCITRAL generally works by consensus, when a division surfaces in the room, it is common for the Chair to call a consultation break to allow deals to be brokered. Typically, a scrum emerges as key players seek to negotiate a compromise, often then involving the Chair in the drafting of an agreed-upon way forward. The scrum cannot make a decision for the plenary–anything worked out must be taken back and put to discussion and consensus in the wider stadium. But this stadium versus scrum dynamic is a crucial element of UNCITRAL’s working processes.

How is that likely to play out here? Well, this week offered a key example. Faced with division on the working plan, the Chair called a consultation break on Wednesday evening. A small number of the key protagonists stayed back to see if they could thrash out a deal. Most other members went home. A deal was brokered and the next morning the Chair circulated a proposed text to see if he had captured the agreement. Disagreement broke out and a collection of states, including representatives from Argentina, Australia, Bahrain, Chile, China, the European Union, Israel, Japan, Korea, Mauritius, the United States, Russia, Singapore, Switzerland and Thailand, ended up in an informal consultation across the hall in a smaller room. (Think of this informal room as a side game, like the G20’s replacing the G7 but not becoming the General Assembly.) Hammering out a deal took two hours.

When the side game players returned to the stadium, hostility was in the air. Some other states felt that they had been excluded from the process; the side game was not inclusive, nor were the debates that occurred in it transparent. Morocco took the floor to say as much, as did Sierra Leone. Morocco said that it would have thought that at least states that had gone to the trouble of putting in a submission – like Morocco itself – should have been included in the discussions. Sierra Leone noted that the Secretariat had announced that informal discussions were under way in the corridor, but he had been to the corridor and hadn’t seen anyone. As a newcomer to UNCITRAL, he had not realised that these negotiations took place in a room across the corridor behind a closed door. The Chair assured everyone that side games are open and that nothing is agreed unless it is agreed on the stadium floor, but in practice deals are hard to challenge once they are brought back to the floor.

Widening the Debate?

The divide between the United States and the European Union means that the views of developing states will shape the future of investor-state arbitration. The debates are wider than ever before in terms of participants. The debates are also wider in terms of options and questions on the table. In addition to the EU-led ‘pulling’ and the US-led ‘dragging’ in reform debates, we can also think about ‘wideners.’ These actors, including South Africa and many civil society groups, ask bigger questions and are seeking to widen the terms of the UNCITRAL mandate, which is limited to ‘procedural’ reforms. Many states agree that investor-state arbitration is due for systemic change. But what should be the starting point for discussions? What goals were investment treaties intended to achieve and what is the positive case for investor-state arbitration or an investment court in light of those goals? Do we need substantive reform and how is it possible to really separate procedural and substantive issues? What role should NGOs and affected communities be able to play in proceedings? Efforts will continue to bring these issues within the process and the existing mandate.

Shifts in geopolitical power demand notice given the declining power of the West and the rising power of the Rest. As the world’s largest economy in PPP terms, China has played an engaged and constructive role in these debates. It has been cautious but has clearly communicated concern that the existing approaches to consistency and correctness are insufficient, which seems to point toward its possible acceptance of an Appellate Mechanism. It also supports a greater focus on alternative dispute settlement. As in the WTO Appellate Body drama, China and the European Union seem potentially to have more in common with each other on the mechanisms for international economic governance (if not the substance) than with the United States.

In terms of other Asian states, Korea and Singapore have engaged considerably; both have leaned toward embracing the need for systemic changes but have been careful to take a measured approach, emphasizing the advisability of developing a sufficient consensus. Thailand submitted a thoughtful paper urging states to focus on reforms to investor-state arbitration; it suggested options such as a roster of arbitrators and an advisory centre, and it took the floor multiple times. Indonesia submitted a paper with a variety of ideas from requiring contractual consent to the filing of investor-state claims to requiring that investors exhaust local remedies and engage in mandatory mediation before bringing an international claim. India spoke from the floor much more than in any previous session. Pakistan made an eloquent intervention on the importance of considering multiple reforms in a holistic way.

Latin American, African and Middle Eastern states are also emerging as important actors, though we do not see the emergence of regional positions to date. Many more African states spoke up this time than at any earlier meeting of this Working Group, including Burkina Faso, Côte d’Ivoire, Democratic Republic of the Congo, Guinea, Morocco, Nigeria, Sierra Leone and Sri Lanka. Morocco provided considerable information on its new model treaty in its written submission. Francophone African states met on Wednesday and, after this meeting, several took the floor for the first time to provide a coordinated response to the one-track versus two-track work plan issue. Various Latin American states are also highly engaged. Argentina has spoken of the need for systemic reform, Costa Rica submitted a paper supporting targeted reforms of the arbitral model, and Mexico went on record in support of the Israel/Chile/Japan paper. Bolivia, Colombia, Ecuador and Honduras took part in the discussion multiple times, raising issues like counterclaims.

Conclusion

In the end, these reforms may be spearheaded by the pullers and the draggers, but they will be decided by where the rest of the world’s states place their weight. As the West experiences declining power and internal divisions, it behoves these states now more than ever to engage meaningfully and constructively with a wide range of other states to determine which solutions best meet the needs of a range of players in the room. That is why, even though UNCITRAL’s process often feels like a battle within the West, it is increasingly apparent that it is really a battle for and by the Rest. The Rest seem to be ready or getting ready to share their views and shape whatever reforms emerge from this process. Those dynamics are the ones to watch for in the future.

*Anthea Roberts attends UNCITRAL Working Group III as part of the Australian delegation but she acts and writes in her independent academic capacity. Taylor St John attends UNCITRAL as an observer from PluriCourts, University of Oslo.

This is a guest post from Ben Heath, Acting Assistant Professor of Lawyering at NYU Law

In Part I of this series, I introduced the idea that the Russia — Transit report embeds a conception of the dispute settlement system as a steward of the WTO rules. As I noted in yesterday’s post, courts adopt a stewardship function by establishing pathways for receiving political signals from affected states (embeddedness), and developing flexible legal doctrines that can be ratcheted up or down in response to those signals (responsiveness). I should add that these are doctrines which the court itself can manage and direct over time (directedness).

To administer a stewardship function, a court requires both a keen sense of its own legal domain and a significant degree of authority to find and characterize the relevant facts. In today’s and tomorrow’s posts, I will identify two critical moves made in the panel report, both of which I think are geared toward securing this flexibility and authority. These moves are necessary predicates to the flexible legal doctrine announced by the court on Article XXI, which I will discuss in Part IV of this series.

In its very first act, the Russia — Transit panel carves out the legal space for itself and future WTO panels to adjudicate sensitive security matters. It does so by deciding not to hold Russia accountable for its internationally wrongful acts in the use of force against, and invasion and annexation of, Ukrainian territory. This was a controversial move by the panel, and it has already been subject to some criticism from those who saw it as overly deferential to Russia. I will argue that, to the contrary, the panel’s decision in this respect operated to strengthen the panel’s claim to authority over trade disputes that are linked to broader international conflicts.

I. The Backdrop

The dispute between Russia and Ukraine over transit restrictions thrust the WTO into complex terrain, not only geopolitically but also legally. The measures challenged by Ukraine (various Russian restrictions on international cargo transit from Ukraine and bound for Kazakhstan or Kyrgyzstan) were adopted in the context of an escalating crisis between the two countries, involving, in particular, the Russian intervention in and annexation of the Crimea.

In the context of WTO law, this backdrop potentially raised the question of Russia’s responsibility for the crisis. Russia’s invocation of the GATT security exception relied on the existence of a “war or other emergency in international relations” between the two countries. The question, then, is whether Russia can escape its GATT obligations by invoking an emergency that, at least in very large part, is of Russia’s own creation. Such a result, it could be argued, offends basic notions of justice and the widely recognized principle that no one should profit from his or her own wrong.

II. The Panel’s Decision

The Russia — Transit panel, in its very first analytical move, declared that it was not interested in being drawn into this broader legal dispute. At Paragraph 7.5, the report states that it is not “this Panel's function to pass upon the parties' respective legal characterizations of those events, or to assign responsibility for them, as was done in other international fora.” The panel then returns to this point as part of its decision that the situation did amount to an international emergency, stating:

7.121. The Panel notes that it is not relevant to this determination which actor or actors bear international responsibility for the existence of this situation to which Russia refers. Nor is it necessary for the Panel to characterize the situation between Russia and Ukraine under international law in general[.]

For those not steeped in public international law terminology, this passage is written in code. The first sentence, by using the phrase “international responsibility,” appears to be stating that the panel will not decide whether Russia breached any of its obligations under general international law (such as Article 2(4) of the UN Charter on the use of force) in its actions vis-à-vis the territory of Ukraine. The second sentence, by using the phrase “characterize the situation,” seems to be saying that the panel is not going to make any authoritative statement about whether the Russia-Ukraine situation amounts to an “armed conflict,” a state of “occupation,” or any other term having legal weight under, inter alia, the law of war.

Two legal results flow from this decision, one explicit and one implicit. The explicit result is that the panel is refusing to make the invocation of GATT Article XXI(b)(iii) contingent on the invoking state’s legal responsibility — a party can invoke the “war” exception even if it started the war. The panel is also implicitly declining to read into Article XXI any requirement that would be similar to Article 25(2) of the Articles on State Responsibility, which provides that a state cannot invoke a situation of necessity under customary international law if that state “has contributed to the situation of necessity.” While this latter test would not directly require passing on a state’s international responsibility for a situation of armed conflict, the net result would be effectively the same.

As a result, the panel is able to find that the measures at issue were “taken in time of war or other emergency in international relations,” notwithstanding Russia’s responsibility for that state of affairs. This would ultimately enable to the panel to find that Russia’s restrictions on transit fell within the security exception.

III. Legal Space and the Stewardship Role

I have already argued that this decision was both legally correct and politically wise. This result is consistent with the text of the exception, which requires only that measures are “taken in time of” war or other emergency in international relations. It also avoids the contrary result, whereby the legality of any trade restriction taken in time of international conflict would require first determining which state is responsible for starting that conflict. Such an approach would effectively privilege one side in any interstate conflict, and it would draw the multilateral trading system into issuing authoritative decisions on precisely the sorts of issues that the security exception was designed to keep out.

This move is thus both legitimacy-preserving and authority-enhancing for the dispute settlement system. The panel is defending against potential attacks on its legitimate role here by making clear that it will not be drawn into broader legal disputes about the legality of a use of force, the existence of a state of belligerent occupation, and so on. It’s signaling that the WTO, which to this point (and perhaps for not much longer) has provided a readily accessible state-to-state dispute settlement mechanism, is not going to be hijacked by one state’s attempt to cloak a geopolitical dispute in trade terms. This framing is thus designed to blunt the attacks of potential critics who would accuse the panel of overstepping its boundaries.

The other side of this coin is that, within the legal space it carves out, the panel is enhancing its authority to interpret and apply the WTO agreements. By declaring that this boundary between trade law and other international legal questions can be preserved, the panel is implicitly rejecting the argument — raised numerous times over the decades — that the GATT/WTO has no role to play when trade is merely epiphenomenal of a deeper geopolitical dispute. Here, the panel is asserting that, whatever the root cause of a trade dispute, questions of trade law can and should be adjudicated within the multilateral trading system.

This result is by no means unique to this panel or to trade law. It echoes a line of cases from international courts and tribunals that decline to dismiss claims on “political question” grounds, some of which are cited in the panel report at note 183. And it resonates deeply with the work and jurisprudence of Sir Hersch Lauterpacht, whose critique of the distinction between “legal” and “political” disputes has worked a profound influence on the profession and practice today.

Nevertheless, this is an important first step to establishing the system’s stewardship role in the context of security measures. In carving out a distinct legal space for it and future panels to work, the Russia – Transit panel is defending the system’s legitimacy and constituting its authority over security measures that affect states’ trade obligations. Although this worked in Russia’s favor in the instant case, it is not a move that should necessarily comfort WTO members seeking carte blanche for their security measures.

Future posts will address the subsequent steps taken by the panel, as well as systemic and normative implications. Before concluding, however, I should emphasize that it is contestable whether the panel was successful in its efforts to create this distinct legal space. In communicating its decision not to appeal the panel report, Ukraine appeared to argue that the report provides support for its assertion that an armed conflict exists between the two countries (see here, in Ukrainian). Indeed, as I will discuss more in the next post, the panel asserted its factfinding authority in a way that brought in many of the same international legal concepts, like armed conflict, that supposedly were not relevant to its legal conclusions. Thus, even as these moves further consolidated the panel’s authority, they may have weakened future panels’ abilities to defend against use of the dispute settlement system for extrinsic political goals.

UNCITRAL’s Working Group III on investor-state dispute settlement (ISDS) reform continues to attract substantial and growing interest. In the first week of April 2019, a record number of states and observers descended on New York to clarify the final list of concerns and establish a work plan for moving forward on concrete reforms. This session continued the earlier trend of hastening slowly. A recognition of the need for reform amongst states is clear but the tempo remains modest given the reticence of some and the panoply of reform options being considered. This blog post sums up the four main takeaways of the week and will be followed by three reflective analytical posts on the West/Rest politics underlying the process, the role of academics in international politics, debates around naming and framing (“we are all systemic reformers now”) together with a concluding post.

A narrow but deep mandate

The session kicked off with a tidying up of outstanding concerns about ISDS. In Vienna in October 2018, states reached a consensus that reform must address three broad concerns: (1) the cost and length of proceedings; (2) inconsistency and incorrectness of decision-making; and (3) problems with arbitral diversity and independence. In New York, attention turned to third-party funding and the identification of “other issues.” Although these agenda items provided an opening for some actors to push for broader reforms, the procedural mandate remained in place.

Third-party funding was viewed by virtually all as a concern to be addressed. While a number of states suggested that definitions of third-party funding differed or were uncertain, a common refrain was that there needed to be greater transparency about such funding. Thailand’s written submission, for instance, highlighted the need for “regulation” in order to ensure “transparency” and avoid “conflict of interests between the arbitrators and the third-party funders”. In the plenary, some states noted the link between third-party funding and access to justice, particularly for SMEs, but others (including observers) expressed concerned that such funding usually benefited one party only (investors), would increase overall arbitration costs, and might reduce incentives for settlement.

Opening up the topic of “other concerns” generated a diverse discussion with NGOs becoming particularly active. Some states and many observers highlighted the need for a focus on alternative dispute resolution, exhaustion of local remedies, genuine participation of third parties (including affected communities) in proceedings, recognising investor obligations with respect to human rights and environmental protection, the role of ISDS in creating regulatory chill, and the calculation of damages. Some also highlighted the need for reform of substantive treaties, e.g., narrowing investor rights or developing model substantive clauses.

The response from the Chair and many states was three-fold. The first was to underline that the mandate was focused on “procedural” reforms to the system. Substantive reforms, such as treaty amendments or investor obligations, were the responsibility of states to pursue bilaterally or plurilaterally. The second was to refer to the “open” nature of the reform process – it must be “flexible enough” to adapt to developments in substantive law and (as the Chair noted) any reform package needs to be legitimate in the eyes of the general public. The third was a reminder of the reform possibilities within the procedural mandate. Third-party financing was a concern about costs; improved third-party participation and damages calculation could enhance the consistencyand correctness of decisions; and investor obligations could be procedurally addressed through counter-claims. In other words, the mandate was narrow but deep.

The battle over working methods

As in a Game of Thrones episode, the real battle was happening elsewhere. The key question for the week was the structure of the Phase 3 work plan: Would delegates work sequentially or concurrently on a series of reform proposals? In other words, should WGIII proceed proposal-by-proposal, finishing one before starting another, or could multiple proposals be considered simultaneously? On this question, the long-standing proxy battle between the two ‘incremental and ‘systemic’ reform camps, represented respectively by the United States and the European Union, burst into the open.

On one side, a ‘joint paper’ by Chile, Israel and Japan, with backing from the United States, Mexico and Russia, set out a detailed sequential approach. The essence was the prioritisation of low hanging fruit. Reform proposals that attracted a ‘high degree of consensus” amongst states (e.g., a code of conduct for arbitrators and disclosure of third-party funding) would be addressed first while more ambitious and controversial ideas would be postponed. According to its proponents, such a sequential approach would secure quick wins and represent a more efficient use of time. Some other states, such as Thailand which had submitted a paper, seemed to agree.

Against this was Swiss proposal, supported by the European Union, Germany and Mauritius, among others. Instead of simply picking low hanging fruit, much of which Mauritius claimed had already being picked elsewhere (e.g., in the ICSID reforms), the Working Group should prioritise reforms likely to respond to systemic concerns about ISDS. This could result in proceeding on two tracks: one dealing with incremental reforms and another with systemic reforms. A concurrent approach would permit the plenary group to address changes to the existing system of investor-state arbitration on one track, along with a number of structural proposals, such as the Multilateral Investment Court (MIC), an appellate review mechanism and an advisory centre, on another track.

Although a clear minority of states spoke in favour of the sequential approach, the majority of delegations from Africa, Latin America and Asia emphasised that the reform process should consider the multiple reform proposal. After long consultations on Wednesday evening and Thursday morning, the Chair announced a compromise that was grounded on making everyone “equally unhappy”. The somewhat ambiguously worded compromise had three elements.

First, the Working Group would proceed concurrently. It would “discuss, elaborate, and develop multiple potential reform solutions simultaneously” (para. 81 of the report). Second, there was to be “balanced time allocation” between “structural reforms” and “other potential solutions” – which partly became the new names for the systemic and incrementalist options after the names became highly politicised (paras. 82 and 83). Third, states would put any other reform proposals they wanted considered on the table by 15 July, and discussions on how to proceed on these would be considered at the next meeting, but work would go ahead on structural reform proposals. States also requested the Secretariat to produce papers on five topics that were relevant to potential reform proposals:

Development of a code of conduct for arbitrators and possibly counsel, in cooperation with ICSID;

Indirect and shareholder claims;

Selection and appointment of adjudicators, with the involvement of the Academic Forum in collecting and analysing relevant information;

Third-party funding; and

Establishment of an advisory centre on international law.

The discussions on the compromise foreshadowed the most significant political development during the week: the clear arrival of the South. As Roberts and Taylor St John discuss in a subsequent post, developing states hold the key to the reform process. However, what developing states want remains somewhat of a mystery. In Vienna in 2018, these states sided with the ‘systemic reformers’ in moving the process forward to discussing reform options; and likewise, in New York, they hindered the adoption of a sequentialist model. However, in both written submissions and plenary interventions, developing states named a range of reform options they were interested in, but few named support for a court, even if they declared an open mind on the matter. Developing states treat the ISDS concerns seriously and want to consider a range of responses. This makes them resistant to attempts to thwart serious discussions of a full range of options and attempts to railroad them into accepting a single solution.

The combination of a multitrack approach with a ‘large developing middle’ puts the different types of reform into some sort of competitive relationship. If the sequential approach had been adopted, states that were less keen on significant reforms might have had an incentive to draw out discussions on various incremental reforms. But now that both structural and other reform proposals are being considered concurrently, these states will have an incentive to ensure that incremental reforms materialise and are attractive to a broad range of states to help lessen enthusiasm for a court. Systemic or structural reformers will also need to carefully build coalitions with developing states to ensure sufficient consensus on their preferred reforms. Ultimately, this regulatory competition may be positive as a smorgasbord of reform options may be particularly important for law-takers who are likely to end up being subject to multiple regimes.

Dilemmas for observers

Political dilemmas were not only the reserve of states. Observer delegations continued to explore how they could best engage in the process. To what extent should observers seek to support the process with their knowledge or experience and to what degree should they challenge it? This tension was symbolically evident in the ASIL delegation, for example. One member, a prominent arbitrator, was openly critical of the EU’s reform proposal and the UNCITRAL process, while the second member, an academic, intervened to provide research insights and analysis.

Many delegations faced this underlying tension of cooperation versus confrontation. For instance, ICSID is currently engaging in a series of reform processes that overlap, and potentially compete, with the UNCITRAL mandate. The ICSID Secretary-General was careful to signal an interest in a constructive and mutually supportive relationship. Civil society groups had previously used the Working Group sessions to criticise the narrowness of the mandate. Yet, in this session, many of these groups tactically sought to identify their more substantive concerns within the existing procedural mandate. Such an approach was also evident in the Open Letter sent in advance by 65 critically-minded academics on the asymmetry on ISDS. It began by noting sweeping concerns but quickly moved to identify procedural reforms (e.g., mechanisms for investor obligations) that could potentially fall within the Working Group’s mandate.

How these dilemmas are resolved is important because observer submissions continue to have an influence on the process even if it is clearly state-led. This was apparent in the reception of some states to the side event organised by the Academic Forum. Members presented seven papers that analysed the pros and cons of different reform options (from ‘No ISDS’ to a MIC) in addressing the identified concerns with ISDS (see summaries on EJIL:Talk!). A concluding slide seemed to point towards the MIC being the option that addressed most concerns. This slide led to some pro-MIC states claiming support from the Academic Forum, until a clarification came from the Chair that the Forum had not expressed support for any option.

Conclusion

The UNCITRAL process is slow, but it is moving. Momentum on the need for reform is clear and has been developing throughout the process. But the direction or directions of ultimate reform remain unclear. The most significant outcome from the last session was that work would go forward concurrently on targeted reforms to ISDS and broader structural reforms. It remains to be seen which proposals, if any, garner sufficient state support to be adopted at a multilateral level. And it remains to be seen how long and contentious the road will be to get to that point.

*Malcolm Langford attends UNCITRAL Working Group III as Chair of the ISDS Academic Forum and a representative of Pluricourts, University of Oslo. He writes here in his independent academic capacity.Anthea Roberts attends UNCITRAL Working Group III as part of the Australian delegation but she acts and writes in her independent academic capacity.

This is a guest post from Ben Heath, Acting Assistant Professor of Lawyering at NYU Law

On April 26, the WTO Dispute Settlement Body adopted the first-ever panel report to interpret the “security exception” to the General Agreement on Tariffs and Trade. This exception allows each member state to take any action that “it considers necessary for the protection of its essential security interests” under certain specified circumstances. The exception has long been understood by some parties, including the United States, to be “self-judging,” meaning that the state invoking the exception has the exclusive competence to decide whether the exception applies. The panel in the Russia — Transit dispute rejected this view: even as it found that Russia had validly invoked the security exception on the facts of the case, it asserted strongly that WTO panels have a significant role to play in policing security measures that impinge on international trade.

Everyone agrees this is a potential turning point for the trading system. Many have already declared the decision to be a “constitutional moment,” perhaps on the order of Marbury v. Madison. Sungjoon Cho, for example, has argued that there would have been negative constitutional consequences had the panel decided the other way, potentially triggering widespread abuses and undermining the system. But perhaps there is also an affirmative constitutional vision of the WTO system embedded in the panel report—a vision that later could be taken up by a revitalized Appellate Body or by other institutions.

In this series of posts, I will argue that there is an affirmative constitutional vision in the Russia — Transit report, and it is a vision of WTO dispute settlement as a steward of the international trade rules. As Julian Arato and I are examining in an ongoing project, international courts take on a stewardship function when they assert a continuing interest not only in the formal application of legal rules, but also in their ongoing vitality. As stewards, in other words, courts attempt to ensure the continued relevance of the legal order they administer to contemporary political controversies, as well as the integrity of and adherence to those rules. They do so by establishing pathways for receiving political signals from affected states (embeddedness), and developing flexible legal doctrines that can be ratcheted up or down in response to those signals (responsiveness). We think that this notion of stewardship crystallizes a dynamic function of international courts that is not readily captured by existing theories of delegation, judicialization, or deference. This concept also identifies hidden costs, and can help guide the design of international courts and the transmission of legal doctrines across regimes.

The Russia — Transit panel report develops this stewardship function through three successive moves. First, it creates a distinct legal space for the panel to operate, which is no small feat given the subject-matter of this dispute. Second, it aggressively asserts a role for future panels in finding and characterizing the facts of a security-related dispute. Third, the panel announces a legal test that provides a flexible and politically sensitive framework for decision-making. The remainder of these posts will develop each of these moves, and a final post will discuss some potential implications for international economic law.

16. Under Article 3.2 of the DSU, the role of panels and the Appellate Body is to preserve the rights and obligations of Members under the covered agreements and to clarify the existing provisions of those agreements in accordance with the customary rules of interpretation of public international law. Panels and the Appellate Body, in their reports, cannot add to or diminish the rights and obligations of WTO Members under the covered agreements.

17. Similarly, the findings of panels and the Appellate Body are not authoritative interpretations of general application of the covered agreements. Under Article IX: 2 of the Marrakesh Agreement, the exclusive authority to adopt such interpretations is granted to the Ministerial Conference and the General Council. In these circumstances, adopted panel and Appellate Body reports, as such, do not have any binding effect on panels or the Appellate Body in subsequent disputes.

18. It is, nevertheless, recognized that it is useful for parties in panel and Appellate Body proceedings to refer to prior panel and Appellate Body reports in developing their arguments. In considering these arguments, panels (in making their assessment under Article 11 of the DSU) and the Appellate Body should carefully consider the extent to which prior reports are relevant to the issues before them. Panels and the Appellate Body should explain in their reports the extent to which they considered the prior reports to be relevant to the dispute at hand.

Is this language broad enough to satisfy everyone? I don't think it conflicts with the current approach outlined by the Appellate Body, and it doesn't use the "cogent reasons" language that the U.S. objects to.

The revised NAFTA includes some clear improvements over the status quo, especially in the Digital Trade chapter. But I remain concerned about the deal’s enforceability. The agreement does not resolve all of the flaws in the state-to-state dispute settlement chapter in the current NAFTA. This includes loopholes that allow parties accused of violating their obligations to delay or even block the formation of a panel. Under NAFTA, no dispute settlement panel has been formed since 2000, and the dispute settlement system generally has been ineffective as a tool to ensure compliance with the agreement. Without effective enforcement, American workers, farmers, and businesses will not see the benefits of this new deal.

Recent trade agreements have avoided the NAFTA loopholes with improved dispute settlement procedures. For example, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) closed these loopholes, ensuring that parties cannot unreasonably delay or avoid the formation of a panel. Both Mexico and Canada have ratified the CPTPP.

Would you be opposed to clarifying that the text of Chapter 31 of the revised NAFTA is not meant to allow panel blocking?

Here is Ambassador Lighthizer's answer:

Answer: The text of Chapter 31 of the United States – Mexico – Canada Agreement (USMCA) is not meant to allow panel blocking. Indeed, panels have been successfully formed under Chapter 20 of the NAFTA (its precursor). As we move forward with Congressional consideration of the USMCA, we look forward to discussing this and any other issues related to enforcement with you and your colleagues.

Recall that three panels were successfully formed under NAFTA Chapter 20, until the U.S. blocked one in 2000, and then no more panels were formed.

As for what Chapter 31 was "meant" to do in terms of panel blocking, that gets a little philosophical, but it seems clear based on the text that under USMCA Chapter 31, a party could use various means -- for example, preventing establishment of the roster -- to block formation of a panel if it wanted to do so. That can be fixed easily enough, and from what I can tell, Canada, Mexico, and the U.S. Congress would all like to see it fixed. I've seen it suggested that the Trump administration resisted any fixes during the negotiations. I hope the pressure from Congress and others convinces the administration to go along with the necessary changes now. Ambassador Lighthizer's response indicates that he is willing to discuss this, so that's good news. If they did fix the panel blocking problem, it could go a long way towards generating support for USMCA from people who normally support trade agreements but are on the fence about USMCA.